House of COMMONS
MINUTES OF EVIDENCE
COMMITTEES ON ARMS EXPORT CONTROLS
IAN PEARSON MP, MR JOHN DODDRELL and MS JAYNE CARPENTER
USE OF THE TRANSCRIPT
Taken before the Committees on Arms Export Control
Roger Berry, in the Chair
Mr Adrian Bailey
Mr David Crausby
Sir John Stanley
Witnesses: Ian Pearson MP, Economic and Business Minister, Department for Business, Enterprise and Regulatory Reform (BERR), Mr John Doddrell, Director, Export Control Organisation, Department for Business, Enterprise and Regulatory Reform, and Ms Jayne Carpenter, Assistant Director, Export Control Organisation, Department for Business, Enterprise and Regulatory Reform, gave evidence.
Q1 Chairman: Good morning and welcome. May I start with a question on where the Government has reached in its consideration of extra-territorial controls. As you know, we very much welcome the Government's decision to extend extra-territorial controls to cover small arms, MANPADS, cluster munitions but our main concern, as we have repeatedly stated, has been to bring within legal control activities which, if they had taken place in the UK without a licence, would be criminal activities; that is that all items on the Military List effectively should be brought within extra-territorial controls. We are aware that there have been discussions between the NGOs and the industry stakeholders. My first question therefore is: what has the progress been in relation to those discussions?
Ian Pearson: The first thing I would like to say is that I think there have been a number of significant successes in general terms over the past year or so. We have introduced significant changes to controls in high risk areas where stakeholders have been calling for change for some time: new controls on sting sticks that were introduced in April, the introduction of a new three-category trade control structure with stronger controls on cluster munitions, small arms and MANPADS, which you have just referred to, which were announced in October 2008, stronger trade controls on light weapons. I think the review that has been undertaken, which undoubtedly we will get into as well, is one of a number of achievements over the last 12 months. With regard to the specific question that you raise on extra-territorial controls, as you know, controls are already in place on a wide range of goods, as I have indicated and as you are very well aware. In April 2009, those will be extended further to cover light weapons - again a not insignificant development. You rightly point out the fact that stakeholders are currently working to produce a joint proposal in relation to any further extension. I have to say that further measures need to be based on evidence of risk; they need to proportionate and workable; and target activities of real concern in an effective way. We are not at the stage yet where there has been a consensus in terms of taking these matters forward. We still want to continue to work with stakeholders to come up with proposals for any further extensions which we believe are workable.
Q2 Chairman: It is always said that you have sub-contracted this job to the NGOs and the defence industry. We have made the very simple case, and year by year you have given us a bit more, so as the years have gone over you have extended extra-territorial controls. The Government has territorial controls in other areas of public policy. Do you not think that the Government ought to be leading on this rather than leaving it to the NGOs and the industry stakeholders to come up with a solution?
Ian Pearson: I believe we have a shared responsibility. There is a process underway, as you are aware, that started well before I was appointed Economic and Business Minister. In the time that I have had to look at it, it really fits quite well with my view about how policy is best made. I happen to believe that we ought to be doing more of what you might call co‑production of policy, working with outside groups, trying to build a consensus on the best way forward. My understanding is that is exactly the sort of process that we are trying to follow in this place. I think that that co-production method is a good one and we ought to look to see if there is consensus about how we take things forward. Ultimately, of course, if there is not going to be any agreement, then it will be up to Government to make a decision as an arbiter of where the balance of advantage lies.
Q3 Chairman: Finally on this, as you are aware, it took years for this Committee and others to persuade the Government to include small arms and light weapons in the category of equipment that is subject ---
Ian Pearson: Yes, and we have responded.
Q4 Chairman: Minister, you have. I am delighted, as I said at the very beginning, and I always want to praise where praise is due. Do you not think that at the end of the day the logic of this is that all the groups on the Military List should be within your new Category B in the export control order?
Ian Pearson: I do not necessarily accept that that is the logic because I think you need to look at whether that would impose a disproportionate burden on industry. As I say, we need to look at evidence of risk; we need to look at proportionality; we need to look at what is workable as well. I think the co-production methods that I am talking about, getting stakeholders to discuss this, is the best way if consensus can be reached. If consensus cannot be reached, then, as I have said, it will be you to Government to form a view.
Chairman: Thank you very much. It was worth a try.
Bruce: I am sure all of us will welcome the
fact that we have a ceasefire in
Ian Pearson: Firstly, I share your view, and I think it is a very widespread view
as well, about the sense of relief that
Bruce: That was my follow-up point. I will finish with this question. If the British Embassy confirmed that F-16s
were used in
Ian Pearson: Firstly, I do not want to go into detail about the way in which we
have taken information about how military equipment may or may not have been
used, but there are obvious ways in which we can ascertain that
information. With regard to licence applications,
as the Committee will be aware, the
Q7 Chairman: The question about the F-16 issue was raised. With respect, I think we need to have an
answer. Everyone knows that F-16s
amongst other weapons of conflict were used in
Ian Pearson: I understand that the decision on head-up display units was taken some time ago. This is a piece of equipment that is put into the F-16 fighter plane. My understanding is that the decisions were taken on that at the time by Ministers looking at the consolidated criteria. I have no doubt that this was a finely-balanced decision at that time.
Q8 Chairman: With respect, the Foreign Secretary at the time said very
specifically that the reason was our economic relationship, our defence industry
relationship, with the
Ian Pearson: I do not accept that there is a fundamental conflict in policy. I do repeat that
Battle: On a point of fact, because I think
the focus is on
Ian Pearson: I am not sure that I accept the arguments that you put there, John. I think that dramatises the situation. I repeat the fact that we look at any
potential export licences to
Q10 Chairman: Before I forget it, you are saying that no licence has been granted for the export of head-up display units since 2002?
Ian Pearson: Yes, that is my understanding.
Q11 Chairman: Have any been applied for and rejected? Perhaps you could drop us a note on that. That is a relevant question. It is an important point.
Ian Pearson: We would be happy to drop you a note on that.
Burden: Could I establish on this issue
whether or not the trade relationship with the
Ian Pearson: I am not going to contradict the Foreign Secretary and what the Foreign Secretary said. Richard, you will be very aware of how supply chains work from the fact that you are an expert in the automotive industry and you understand how there are integrated supply chains in the aircraft industry as well. I think we need to bear in mind some of that in terms of the practicalities. Government will continue to assess applications on a case-by case basis against the consolidated criteria.
Q13 Richard Burden: Will they be the pre-eminent consideration? That is a matter of policy. They are either going to be the pre-eminent consideration or they are not.
Ian Pearson: Yes, they are. May I read out what the then Foreign Secretary actually said in July 2002? "The Government will continue to assess such applications on a case-by-case basis against the consolidated criteria, while at the same time having regard to, inter alia, the following factors: (a) the export control policies and effectiveness of the export control system of the incorporating country; (b) the importance of the UK's defence and security relationship with the incorporating country;" - and that is the point I think the Committee are making - "(c) the materiality and significance of the UK-origin goods in relation to the goods into which they are to be incorporated, and in relation to any end-use of the finished products which might give rise to concern; (d) the ease with which the UK-origin goods, or significant parts of them, could be removed from the goods into which they are to be incorporated; and (e) the standing of the entity to which the goods are to be exported." The then Foreign Secretary was very clear that the overriding concern would be that the Government would continue to assess such applications on a case-by-case basis. He gave a number of different criteria. I think it is very clear from what he said that the consolidated criteria are important.
Crausby: I hear what the Minister says about
a case-by-case basis and I completely accept, as many do, that
Ian Pearson: I think we are all horrified about the loss of lives and in
particular of innocent children in
John Stanley: Minister, you said earlier
that in your view there has been no change of government policy towards arms
Ian Pearson: We do not have a complete
picture about whether British equipment was used. As far as head-up displays is concerned, my
information is that no licence applications have been approved since 2002 for
Q16 Sir John Stanley: Minister, I put it to you that the issue of the Government not licensing any more F-16 head-up display units since 2002 is irrelevant to the point I am making. The point I am making is that as a result of the change of policy which the Government made, announced by the then Foreign Secretary Jack Straw, under which head‑up displays were licensed, those displays will have been exported to Israel; they will have been installed in the Israeli Air Force's F-16s. I ask you, Minister, when you have completed your assessment, if you will provide confirmation to this Committee that the F-16s that were in use over Gaza over the last three weeks that have been responsible for the deaths of 1300 plus innocent Palestinians did incorporate within them British head-up displays?
Ian Pearson: I am happy to see what further information I can make available to
the Committee about the use of head-up displays. As I repeat, my advice is that at the moment
it is not completely clear what equipment has been used. Clearly, there will be further information
available in due course as we and other governments look at these matters. I will happily endeavour to make information
available to the Committee. Can I just
Q17 Sir John Stanley: Finally, Minister, if it does transpire - and in my own view it is a well nigh certainty - that British head-up displays were in use in the F-16s that have been responsible for the civilian deaths in Gaza, if that transpires to be correct and I believe absolutely certainly that will be shown to be correct, is the Government willing to revert to the previous policy in this area in particular in Israel and the Occupied Territories of no British arms sales into this area?
Ian Pearson: I think the hon. Gentleman with respect is trying to paint a
different picture to what happened under previous administrations to that which
I understand to be the case. I do not
want to go there and make this party political; it is far too serious for
that. What I do want to say to the Committee
is that we will want to factor in all relevant information when it comes to
making future decisions about export licences of equipment that could be used
Gapes: I have two specific questions. Firstly, I received an email from a Dr Wilson
Ian Pearson: My understanding is that we have spoken to this exporter and they have confirmed what we already know from our own database, namely that whilst they do export UAV engines to Israel, the engines are a particular variant which is not used in Israel but is incorporated into UAVs for onward export so that they would not have been involved in the current conflict.
Gapes: That is what you understand. Do you have any information from
Ian Pearson: I would make the point that
Ms Carpenter: Our licensing database shows that we have only issued licences for those
particular engines for incorporation in
Gapes: Perhaps you could give us more
information, if you have it. That takes
me to my second question. On 7 October,
our then Clerk wrote to the Foreign and Commonwealth Office on the Quarterly
Report on Arms Exports requesting a reply and received a reply from the
parliamentary team dated 20 November.
The question we asked, and this was in October and the reply came on 20
November, was: We would be grateful for
a note on the Israeli naval and land blockade of
Ian Pearson: Mike, you have made your point. It is up to the Foreign Office to reply. You are Chairman of the Foreign and Commonwealth Office Select Committee. I am sure you are taking it up with them.
Q21 Mike Gapes: Minister, that is not good enough. The Foreign Office does not reply just in and of itself; there are government departments involved. They have to get the information from the Ministry of Defence and from your own department and they need to co-ordinate the response. You know very well that they respond on behalf of the Government collectively, so it is no good trying to pass the buck on to another government department. This is a serious issue.
Ian Pearson: If I had a chance to finish what I was saying, it is that it is the Foreign Office's responsibility to lead in producing a reply on this. I will personally chase it up with them and see that you get a reply as quickly as possible.
Mike Gapes: We would like a response on the other issue quickly as well, please.
Q22 Linda Gilroy: This is a general point following on from what Mike has just raised. You said in response to the first question on this series of questions that apart from the fact that there were some obvious ways in which you would be proactively monitoring what has been happening in a very distressing conflict of recent times, you were not prepared to share openly with the Committee exactly what the nature of that would be. Clearly we all need a very high level of confidence that that is going to be done on almost a case-by-case audit of every licence that has been issued in recent times under the consolidated criteria. Would you be prepared to share with the Committee more detail of how that will be done on a private basis, if necessary?
Ian Pearson: We always seek to be as open and transparent as we can in providing information, in particular information to the Committee. We do have a number of sources, including intelligence sources, where it might be difficult to actually put that information into the public domain, but we will do as much as we sensibly can to make sure that information is available to the Committee. Certainly I can guarantee that we will look at all the sources at our disposal and make sure that we factor those into licensing decisions and that those licensing decisions remain consistent with the consolidated criteria.
Burden: Minister, could you clarify
something that has been bothering me.
The argument you have been advancing is that whilst
Ian Pearson: The difference, as I understand it, is that there is a UN resolution
which has been agreed upon and the
Richard Burden: I am not suggesting that. I am just suggesting that if there is an arms embargo on one side, should there not be an arms embargo on both sides?
Chairman: We have had quite a lot of discussion on this issue. I think the concerns of members of the Committee of all parties have been clearly expressed. The only other thing I would say is that obviously we would appreciate as quick a response as possible to the specific questions that have been asked.
Q24 Mike Gapes: I want to switch the focus to broker registration. Mr Doddrell, in evidence to our Committee, said that the Government was not yet fully convinced at that stage of the benefits of a registration system and that although in principle you are not objecting to it, there is still no proposal for such a register. Why are you not yet convinced, or was that last year and are you now convinced?
Ian Pearson: There are a number of things I want to say on this, and John can obviously speak for himself. The first thing I want to say is that the responses to the consultation document for the 2007 Review of Export Controls were quite mixed - some strongly in favour of a scheme and others opposed or cynical about the value of actually having a register. The second thing I want to do is to make a distinction between a register and a pre‑licensing registration system. In practice, we already have a register of traders because we have a comprehensive database and can use it at any time to show who is using trade control licences. We can use this information to direct our awareness-raising or compliance‑visiting activity. What we do not have is a pre-licensing registration system under which traders have to be vetted before they can be registered. I have looked at this. At the moment, I am not fully convinced that a pre-licensing registration scheme at this stage would be the right way to go and whether it would justify the additional bureaucratic burdens that would be involved in doing this, particularly in view of some of the other steps we are taking at the moment. I would prefer us to look at how well the initiatives that we are currently pursuing are working, such as clamping down on those who misuse open licences and focusing our awareness activity on traders at work, before considering this further. I am not saying that I would rule it out but at the moment I am not convinced that it is absolutely necessary.
Q25 Mike Gapes: You mentioned bureaucratic burdens. Are these bureaucratic burdens on the Department because you would have to have more people monitoring this or is it business burdens?
Ian Pearson: It would be both but there certainly would be burdens on legitimate businesses that would have to comply with this, and we would have to see whether we think it is proportionate or not to place those additional burdens on them.
Q26 Mike Gapes: Have you done any assessment of what kind of burdens you are talking about or is this just some unquantified fear which has not really been assessed?
Ian Pearson: John Doddrell might want to say something on that in detail. If you are going to have some sort of pre-licensing registration system, it clearly is going to involve some additional burden on companies. I would really like to see how some of the other measures that we have announced and are taking forward are going to work out before deciding whether it is important.
Mr Doddrell: The difficulty about a register is that it is another hoop which an exporter has to go through before they can apply for a licence. There are detailed questions that need to be worked out about what the registration process involved, what the requirements would be on information to be provided by the trader or the exporter in order to become registered. All of those sorts of things would need to be looked at very carefully. There is a question of how far you draw the register. Is the register to be limited to traders and brokers or is it to be extended to exporters as well? Even if you limit it to traders and brokers, you are not only catching the people who are doing the illicit arms dealing or are verging on the edge of the grey arms market; you are catching a lot of very legitimate businesses with rather big names like potentially Rolls-Royce or British Aerospace who are involved in moving arms equipment around from one country to another. So potentially you are talking about a significant burden here on business. We as a department would need to be absolutely convinced that that was justified before going ahead with the register.
Ian Pearson: Just to labour the point, we do have a de facto registration scheme at the moment for companies that have applied for licences.
Q27 Mike Gapes: If you have that, then surely you just need to add some kind of vetting system on to your existing SPIRE system, and that therefore does not put extra burdens necessarily on business; it just requires you to put some more resources up to carry out this necessary process.
Ian Pearson: In effect, we assess every licence application anyway, do we not?
Q28 Mike Gapes: The question is how rigorously?
Ian Pearson: I would maintain that we have a thorough examination of each and
every licence application. We should not
forget here that in the
Q29 Chairman: Given that the Department has said in the past that it can see clear advantages into such a system, this is still under consideration, is it not?
Ian Pearson: It is under consideration. As I have said, we have not ruled it out but officials would need to convince me that it is a proportionate thing to do and that the advantages of doing it would exceed the disadvantages in terms of the burdens that would be imposed on businesses.
Q30 Chairman: Officials recognised that there is the case here some months ago. They are still looking at it?
Ian Pearson: Yes.
Q31 John Bercow: I listened to Mr Doddrell's response to Mike a moment ago and it did strike me as an absolutely impeccably sound-free response, if I may say so, and I do not mean that discourteously. It did strike me as a response in which the only words not stated but were implicit were "long grass". I gained the very distinct impression that any such idea was heading for or had already arrived at the long grass. My concern is just for a degree of clarity and specificity. If the situation is that quite frankly you think the whole thing is not worth it, that it is too expensive and it is going to upset business and it is not worth the candle, that may well dissatisfy the Committee but a blunt statement to that effect would at least have the advantage of candour. If the reality is that you want to preserve the fiction that the matter is under review, you are always open to persuasion and you are listening to the arguments, what I really want to know is this, Minister or from Mr Doddrell: is active work on the complexities being undertaken? Is work being done by officials looking at what Mr Doddrell described as the range of operational details that would need to be covered in order to draw a full model of how such a system might work in practice? Is such work going on or not?
Ian Pearson: Yes, it is going on. My understanding is that officials will, at the appropriate time, produce a submission to me and I will take a view as to whether I think it is worthwhile pursuing or, as you say, can it and say that we are not going to do it.
Q32 John Bercow: Therefore at a subsequent meeting if the same question were posed, we would be advised of some more detailed work that had been undertaken and precisely what conclusions could be drawn from it? We would get the impression at that point, would we, that the decision was not in abeyance or relegated to the long grass but distinctive and probably final?
Ian Pearson: Yes, work is going on. As I have indicated, I would like to see how some of the other things that we are doing actually pan out because that would affect our decision as to whether we think that there is a balance of advantage in having a pre-licensing registration scheme or not. If we think that there are other policy instruments that can obviate the need for something like this, then obviously you would expect us to take those into consideration.
Q33 John Bercow: The work currently under way, and I am quoting Mr Doddrell, has been under way since 2007 but it is so immensely onerous and burdensome and long term that in 2009 a conclusion has not been reached. Will a conclusion have been reached by this time next year?
Ian Pearson: Possibly.
Q34 John Bercow: I said "long grass", Minister. It is extremely long grass!
Ian Pearson: Can I explain why I say "possibly"? I do want to ensure that there is sufficient time for us to assess the impact of us putting some small additional resources into this area so that we can clamp down on those who misuse open licences and those sorts of areas will have effect as a policy. You cannot simply say: we will assess this in one month or two months. You need to give it a time period.
Q35 John Bercow: You are in no danger, Minister, of being accused of excessive haste in this.
Ian Pearson: Thank you for that, John, but, as you know, I have always believed in confronting decisions and making them and I will be perfectly prepared to make a decision in this area. Some of these things have a natural timescale in which it is appropriate to make a decision. When it is the appropriate time, I will not shirk it; I will make it.
Chairman: We have had to wait in some other areas for decisions. We prefer the right decision and a little waiting than to have the wrong decision tomorrow morning. Thank you for that.
Battle: I am afraid mine is that
question: is work going on, and I am
tempted to say is real work going on, to quote the Prime Minister, and, rather
than just looking at an in‑tray, are things moving on? The reason is that as a Committee in our last
report we have welcomed the Government's intention to introduce end-use
controls through the EU if possible. I
gather that has not proved possible. The
Government did suggest that they could be introduced independently in the
Ian Pearson: As a Government, we have always taken the view that the best thing
to do is to go down the EU route because that ensures there is a level playing
field and that we have other countries involved in doing the same thing. We do need to get this right. We have been working on a proposal to extend
the scope of the EU military end-use control that was introduced in 2000. Once finalised, this will be put to the
Commission and other
Ms Carpenter: There are two potential end-use control issues that we are pursuing
Ian Pearson: May I add one point to this in that I think there has been a significant amount of focus on this since the issue arose of Land Rovers that were then militarised and exported from Turkey to Uzbekistan. We are all familiar with that. I was asking officials if they could tell us about other instances that we need to be aware of. In general, I believe that we ought to be looking at where the problem is and how do we provide a solution, rather than providing theoretical solutions to problems we are not sure exist. I have agreed to give the Committee information. If the Committee has information about where it thinks that there are particular problem areas, I think that would be very helpful to us because we are not aware, as far as I understand it, of significant problems that have been raised since that episode. We would welcome any information that is available, whether it is from the Committee directly or from others who hear our proceedings.
Battle: Just to follow that through, we were
promised information on
Q38 Mr Bailey: Could we cover the issue of re-exports. Basically the position in this Committee, as you know, has been in favour of such restrictions. I think it is fair to subscribe the attitude of the ministers and former ministers as being that they have genuflected in the direction of that but will not make a decision to alter current policy. The former foreign secretary said that it might have been desirable and another minister said, "I am seriously thinking about the practicalities of this," but it has not happened. What are the legal or practical difficulties that have prevented them from taking this decision? Why are those practical or legal difficulties not relevant to the other 11 EU countries that to a greater or lesser degree do have restrictions on re-exports?
Ian Pearson: First let me say something in
terms of the Government's view and then address directly the problems that you
raise in terms of answering the question what are the legal difficulties. The Government's view has always tended to be
that any risks posed by a country of ultimate disposal or end user will be
factored into our risk assessment under the licence application. We have not necessarily believed that we need
specific re-export clauses because we can and do, in fact, refuse applications
because of concerns about re-export. Our
view has always been as a government that the introduction of a no re-export
clause on licences is not necessary or feasible and would be onerous to operate
and virtually impossible to enforce. The
comments that you quote from some government ministers reflect that there is I
think a commonsense view that this would be a desirable thing to do but in
practice there are some very serious practical legal barriers. You mentioned a number of countries that do
have a no re-export clause. I would say
in response that I would be interested to see any assessment about how legally
effective they think they are and how operationally useful they think they are
as policy instruments compared with the sort of policies that we have at the
moment. Our view is that the key
difficulty in including a no re-export clause as a licence condition is
determining, first, to whom it would apply and, second, against whom any action
would be taken. If it is to the
exporter, then it would be wholly exporters responsible for events outside
their control. If it was to the overseas
customer, then the obligation would be unenforceable as it would be beyond the
Q39 Mr Bailey: I accept that it would be quite an interesting exercise to see how, if you like, this process works with other countries, but I do not want to be sidetracked down that particular path. As of this moment it might be interesting to know, given the fact that you have said these issues are factored into the granting of an export licence, what monitoring is done to ensure that once that export licence has been granted there has not been, if you like, re-export of the items in question. Can you give any sort of figures or at least outline what process is carried out to ensure that this does not happen?
Ian Pearson: On the first point, we do pay
particular attention to some countries where we have strong concerns of the
possibility of re-export.
Ms Carpenter: Before the licence is issued,
it is part of the assessment process to ask
Q40 Mr Bailey: In effect, it is very difficult to have a totally comprehensive monitoring process.
Ian Pearson: It is not necessarily very difficult but it would be hugely expensive and, again, I think you would want to look at the proportionality of doing that.
Q41 Mr Bailey: Have you in recent years revised your policy towards either a company exporting or a country as a destination for these exports?
Mr Doddrell: Yes, we have.
Q42 Mr Bailey: That would imply at least that it had been got wrong, to put it crudely, in a previous assessment.
Mr Doddrell: I will try not to sound like Sir Humphrey this time. Not necessarily. Situations change over time and we continuously update and revise our policy towards particular exports to reflect the circumstances of the time.
Q43 Chairman: Would it be possible to let the Committee have a note of some examples here. If for whatever reason you are absolutely convinced it needs to be strictly confidential, of course we can deal with that. We do that all the time. A note of some examples on this would be quite useful.
Ian Pearson: One of the key things to point out as well is that when we are assessing export applications, we will look at the destination and the export licensing regime of the country to which the goods are going to be exported and, also, that country's record on a range of issues from human rights to meeting international obligations as well. There are some countries obviously about which we would not have any strong concerns.
Q44 Chairman: Of course, but it is a question about changes in policy. The qualitative data in the annual report is a snapshot of where we are at some point in time. This question raises a very interesting point about shifts in policy as a result of experience. I dare say there is some limitation for what can and cannot be said in public about examples, but, either way, I know colleagues would be interested in a few examples and perhaps a brief note might help on that.
Mr Doddrell: I am very happy to provide that. I am thinking particularly of diversionary destinations, where, as we close off one diversionary route, countries find another way of getting what they want. This is an example of the sort of thing I am referring to and I would be very happy for the minister to write to you on that.
Ian Pearson: As an alternative, if you would like it on an informal basis, it is my understanding that it has been round about 18 months since the Committee visited the Export Control Organisation, and if you wanted to have a further visit and a session where these issues could be discussed, I would be happy to arrange that.
Chairman: We would appreciate that. Perhaps the note could be done and we could then think about fitting a visit into our programme - which would be keen to do.
Q45 Sir John Stanley: Minister, I hope we can agree at least on this: do you agree that if a British arms exporting company was able to establish licensed production for a particular arms reference overseas and from that licensed production facility overseas was able to export arms to destinations that would not be approved of if they had been exported from the UK that would represent a serous breach of arms control policy?
Ian Pearson: I certainly agree with you
that this is an important area. The
extent to which we could or should control licence production overseas, as you
know, featured very strongly in the 2007 review, and in the Government's
response we concluded that there was not a convincing case for enhancing
controls on the export of controlled goods specifically in relation to licensed
production. There is a stronger case for
enhancing controls on the export of non-controlled goods and the cases of overseas
production where issues have arisen have all related to goods for military end
use, which were not controlled when exported from the
Q46 Sir John Stanley: I myself cannot accept that the difficulties to which you are referring are in any way insurmountable or, indeed, in any way necessarily unprecedented. The Committee's recommendation was quite clear, that the Government make export licences for suppliers with licensed production facilities or subsidiaries subject to a condition in the export contract preventing re-export to a destination subject to UN or EU embargo. That is a recommendation which is perfectly enforceable as a condition of the Government granting the licence for production overseas. It stipulates that that particular contract has to be coupled with an undertaking from the recipient of the licence that they will not export from the licensed facility overseas items to an area which is subject to a UN or EU embargo. There is nothing difficult contractually about making that a condition of the granting of a licence.
Ian Pearson: I think there is a difference
between the extraterritorial controls that we have over
John Stanley: Minister, perhaps you need to take some
further legal advice. We are talking
here solely about
Ian Pearson: I disagree with that
entirely. Let me have another go and
then I will let John say something from his perspective. If you are talking about UK-domiciled
businesses that have a licensing agreement in a foreign country, then there is
the potential under
Mr Doddrell: The only point I would like to add to that, if I may, is that we should not underestimate the extent of the controls that we currently have. If a company wishes to set up a production facility in a country overseas to make particular goods, weapons say, they would need to export technology to that country, they would probably need to export equipment for the manufacture in that country, all of which would be controlled under the licensing arrangements as they stand. If we have any reason to believe that that production facility overseas would be used to supply countries where we would not want the goods to go, then we would refuse the licence for the transfer of the technology.
Sir John Stanley: With respect, it is not a question of refusing a licence; the issue is once the licence has been granted. The Committee is saying that it is a condition of the grant of a licence. The Government includes in the conditions the power to revoke the licence - which is the key point: to revoke the licence - if there is transit of goods from the licensed production facilities to countries that are subject to an EU or UN embargo destination. It is very simple. The key lever that the Government has is to build into the original conditions pertaining to the licence the ability to revoke the licence if that particular requirement is not met.
Q48 Chairman: We seem to be getting: "Yes, we can," "No, we can't". Sir John has made an argument, a very clear one I think, that he can see no legal impediment to doing this. Could you perhaps write to us, Minister, explaining what your advice is on what is wrong with that argument?
Ian Pearson: Following on from what Sir John has said - and I appreciate the strength of feeling about this issue but also the argument that he makes - let me take it away and look at it again.
Q49 Chairman: Thank you very much. Minister, your predecessor told us that any changes arising from the review of export controls would be implemented by April this year. Is that still the case?
Ian Pearson: Yes, my understanding is that that still is the case. We are on track to do that.
Q50 Chairman: Thank you for your letter, by the way, but we will not go there.
Ian Pearson: I am sorry if there was some feeling that we did not give as much time as possible to matters.
Chairman: Yes. We will go on to dual use.
Bruce: It has obviously been of concern to the
Committee the extent to which we can ensure that both the licence system and
the potential exporters are really connecting on the potential for abuse of
products which could be converted. That is well rehearsed. You have set up a working group to consider
the EU Council Regulation and the Government's position has been that you did
not think it would require domestic
Ian Pearson: Dual use is certainly an area where there is EU regulation under the EU dual-use regulation. You are right to say there has been a Council Working Group review. I think there was some hope that during the French Presidency it would come to conclusions, but that has not been possible. On the Council Working Group, as I understand it, the latest information is that you will need to consider a Commission proposal of 5 January this year. The Commission propose introducing licences to a range of destinations for low value shipments, export after repair or replacement, temporary export for exhibition, computers, chemicals, telecoms and information security. The Working Group will also need to consider its input into the new lines for action by the European Union in combating the proliferation of weapons of mass destruction and their delivery systems which was endorsed by the Council on 8/9 December. There is still some more work for the Council Working Group to do and we are playing our full part in that.
Ms Carpenter: As to the question of the
Bruce: In terms of the desire to ensure that we do
not have embarrassments such as we have had in the past, are you satisfied that
the regulations will be clear enough and give the necessary guidance to
Ian Pearson: We want to continue to play a
leading role in the discussions to ensure there are improvements to the
dual-use regulations. Obviously they are
still being discussed at the moment, so we do not know what the outcome is
likely to be, but I can certainly assure the Committee that the
Q53 Malcolm Bruce: Presumably it remains an obligation on Member States once these regulations are in place to provide effective means of communication.
Ian Pearson: Yes.
Q54 Malcolm Bruce: We have had deliberate abuse, but I think that has been so well publicised that it is not likely to happen again, but it is the inadvertent, na´ve, middle-ranking supplier who gets caught up in it and does not quite know. I want to ensure that this regulation and this process has reduced the risk of that happening and is an effective means of ensuring that it does not happen.
Ian Pearson: I agree with you that those are sensible objectives and those are the sorts of things that we would like to see as outcomes, because we want to see a proportionate dual-use regulation that is fit for purpose and that we agree on.
Q55 Chairman: We had a bit of difficulty, as you know, in terms of understanding what was happening in relation to the average time for dealing with SIEL applications and arising from the fact that collectively the department was using the word "average" to mean two different things - and I am tempted to slip in a third, the mode, as well as the median and the mean. Because one answer to a parliamentary question gave the mean figure and the other data we had was the median figure, it looked like things were getting worse. I am happy to accept totally that the figures are not in terms of the time for dealing with these applications, but it would be a good idea if people stopped using the word "average" and just said whether it was the mean or the median, or, indeed, the mode - a slightly techy comment, but GCSE stats and all that!
Ian Pearson: I think we have clarified any misunderstanding between ourselves.
Q56 Chairman: Yes, but we have a script for interrogating you on this point.
Ian Pearson: We will try to make sure that we are very clear and precise in terms of our use of language in the future.
Q57 Chairman: Thank you. In terms of the searchable database, is that still on course?
Ian Pearson: Yes, it is.
Q58 Chairman: I think we are going to have a briefing on it.
Ian Pearson: Yes. It is on course. In response to the Committee I can say today that we have accepted its recommendation and we will be taking it forward. We hope that the database will be available for public use later this year. We have not yet settled on some of the detailed issues.
Q59 Chairman: Do we know what is meant by the end of this year?
Ian Pearson: Certainly sometime in 2009.
Q60 Chairman: That will also go down as a "Bercow comment".
Ian Pearson: I am told that we are aiming for April, so that is going to be pretty quick, but obviously we wanted to seek to consult with people to make sure that it is helpful in terms of those who want to use it as well.
Q61 Chairman: Thank you. My final question is that the Committee have on a number of occasions suggested that the Government carry out some research on the effectiveness of the export control system, purely as good practice. The last time we suggested this, the Government's response to the Committee was that the Government was still considering commissioning a study but was basically looking into that. Is that still under consideration? Are there any terms of reference? Where are we now?
Ian Pearson: Yes, it is under consideration. I would like to see it happen. I have discussed it with officials in the run-up to appearing before you today and I think there is a good case that this is an acceptable use of public funds. There are some figures that get bandied about at the moment in terms of non compliance which worry me, because I do not think that they reflect the reality. On specific facts and figures, because I think it might be helpful to the Committee, Her Majesty's Revenue and Customs regularly retain dual-use goods at the frontier to establish whether the necessary licences are in place, and in 2007, on the figures I have, HMRC detained goods at port on 969 occasions. On 88 per cent of these occasions goods were found not to require a licence at all, but of those that did require a licence only 25 per cent or three per cent of the overall total required a dual-use licence. These figures suggest a much smaller problem than some of the figures that have been bandied around previously. When it comes to the specific point, I do think that it would be a sensible use of public money to have a study that looked at non compliance in the dual-use sector. Whether the Committee were thinking about a wider study I do not know, but specifically with regard to the dual-use sector I think this is an area where we should be commissioning some research.
Q62 Chairman: Thank you very much indeed, Minister. I would like to thank you, Mr Doddrell and Ms Carpenter for coming to our Committee. We have raised a number of questions and there will be other questions no doubt that we will wish to write to you about. Particularly on the earlier discussion, you will appreciate the concerns that the Committee has about the Government's policy in that area and so any response on those issues as quickly as possible would be very much appreciated.
Ian Pearson: We will certainly endeavour to do all that we have said we will do during this Committee Stage. Thank you, as always, for the courteous way in which you have probed me and my officials in this area. As I say, just as a parting comment, I do believe that we have one of the best export control regimes to be found anywhere in the world. That is not to say that it cannot be improved. I think through scrutiny these things can be improved, and we appreciate the work of this Committee and its predecessor the Quadripartite Committee in helping us do just that.
Chairman: Thank you.