UKWG ON ARMS
Submission: 2007 review of the UK Export Control Act
28 September 2007
SECTION 3: RESPONSE SECTION FOR COMPLETION
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Jacqueline Macalesher on behalf of the UK Working Group on Arms Saferworld The Grayston Centre 28 Charles Square London N1 6HT
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The organisation represents:
For the purposes of this submission the UK Working Group on Arms (UKWG) comprises of Amnesty-UK, British American Security and Information Council (BASIC), Oxfam GB and Saferworld.
The views of the members of the organisation were assembled by:
Jacqueline Macalesher, Transfer Controls and Small Arms Team, Saferworld [email protected] Tel: 020 7324 4662
1 The UK Working Group on Arms (UKWG) has approached this submission from the perspective that everything in the current legislation is “on the table”, on the grounds that this may be the last chance for a considerable period of time for such comprehensive engagement with the Government regarding the Export Control Act (ECA) and its contingent secondary legislation. This submission therefore contains a number of recommendations that would require changes to primary legislation. While appreciating that this has implications for the parliamentary calendar, the UKWG believes the review should not consider only changes to the Control Orders where analysis suggests other changes are necessary.
At the same time, we have attempted to concentrate our limited resources on those issues with which we are most familiar or which we consider of most importance. This submission thus makes no pretence to be fully comprehensive; many of the questions asked in the 2007 Review of export control legislation: a consultative document are not addressed herein. Any lack of response to specific questions in the consultation document should not therefore be taken to mean that the UKWG believes no improvements could be made to the legislation in those areas.
Furthermore, while we understand the need to base changes on evidence wherever possible, the Government should resist any inclination to rely only upon evidence from NGOs regarding breaches of the current export control legislation. NGOs have far fewer resources to draw upon in this area than governments; NGOs do not have access to the intelligence and policing information available to governments; and there are also issues of personal risk that NGOs must consider when determining how vigorous to be in attempting to gather the type of evidence useful in this context. The Government should be making active use of its own capacity to compile evidence.
Finally, but most importantly, we feel it is critical to keep in mind the fundamental issues at stake in what may frequently appear a relatively dry and technical process. Irresponsible arms transfers result in untold misery for millions of people around the world, be it as a direct consequence of countless individual human rights violations, or due to the broader negative impact they have on peace and security and sustainable development. The costs of putting in place a truly effective system of arms transfer control may not be insignificant; however the cost of failing to do so could be absolutely immense.
2 QUESTIONS ARISING FROM SECTION 1: ECO’S INTERNAL EVALUATION
Trade controls on “Controlled Goods”; activity within the UK – effectiveness
For all readers
Q27 Do you have any other comments or evidence on the effectiveness of the trade controls on trading in “Controlled Goods” carried out from within the UK? If so, please provide details.
The UKWG is aware of a number of cases involving the effectiveness of the trade controls on trading in ‘Controlled Goods’ carried out from within the UK.
In September 2004 a newspaper reported that it had obtained documents showing that arms brokers based in the UK had been involved in negotiations for arms deals to supply £2.25 million worth of arms to Sudan. 1 Sudan has been subject to an arms embargo since 1994. The documents, which have been seen by Amnesty International and other researchers, were made available to the Government. These included a series of End-Use Certificates (EUCs) which were all dated and stamped after March 2004 – the date when the new controls on Trafficking and Brokering came into effect. One of the EUCs, issued on 25 May 2004, authorised the UK company Endeavour Resources UK Ltd to negotiate for the supply of multiple rocket launchers, main battle tanks, armoured personnel carriers, armoured fighting vehicles, field guns, and pistols. In answers to parliamentary questions, despite the existence of such strong evidence of these documents, the Government has stated that it believes there is insufficient evidence to investigate that matter further.
In September 2007 Cardiff-based company BCB International Ltd attended the Defence Systems and Equipment Exhibition (DESi) in London and distributed CD-ROM catalogues which included details and images of leg-cuffs and a ‘taser’ device. Although difficult to confirm from the catalogue alone, and in the absence of confirmed information about the actual supply of such equipment by BCB International, nonetheless this taser device may fall within the Restricted Goods category PL5001(g). Similarly, although the specifications of the BCB leg-cuffs suggest that they fall technically outside the (2006 version) of the PL5001(c) Restricted Goods category definition by exceeding 280mm in length, this has only become the case since the 2006 redraft of the category’s definition weakened the regulation. 2
In addition, the UKWG has evidence on the effectiveness of the trade controls on trading in Restricted Goods carried out from within the UK.
The UKWG is aware of at least four companies registered in the UK but trading in Germany, offering for sale electroshock weapons and/or leg iron restraints. While the businesses are based in Germany, in each case a company with the same name has been registered in the UK, with a staff member of the German business named as a director of the UK company, thus appearing to make the business a UK entity for the purposes of the Trade in Goods (Control) Order 2003. The four businesses are involved in promoting equipment which, if exported from the UK or brokered by a UK entity, would breach export control legislation. 3 UKWG member Amnesty UK informed Her Majesty’s Revenue and Customs (HMRC) of these apparent ongoing breaches in April 2007, but to our knowledge no action has been
1 Briton supplies arms to Sudan , The Sunday Times (5 September 2004) and Sudan Arming the perpetrators of grave abuses in Darfur , Amnesty International (16 November 2004), AFR 54/139/2004. 2 BCB International, Special Forces Equipment Catalogue, obtained at the DSEi defence exhibition in London (September 2007). 3 Der Klu. International Ltd (UK Company No. 05965312)
3 taken against the companies.
There have been a number of cases involving the advertising and marketing of prohibited goods. As far as the UKWG is aware none of these companies has been investigated or prosecuted. For example, in November 2004, researchers discovered that TLT International, a London based company – registered in the UK, was openly advertising a range of stun guns and stun batons via the company's website. In March 2005, the Guardian newspaper reported that TLT International quoted to researchers posing as arms dealers for the supply of 500 stun batons for use by the Zimbabwean security forces during elections. 4
On 3 October 2005, it was reported in the New Statesman that the website Army- Technology.com, run by London-based SPG Media Ltd, was promoting the sale of shock batons from a Chinese company, Huajin Co Ltd. 5 The New Statesman section also detailed how an order for shock batons had been placed, via Army-Technology.com, to Huajin Co on ‘behalf’ of Department of Trade and Industry (DTI) Minister, Malcolm Wicks. 6 It would therefore seem that the Army-technology.com website not only lists products for sale but also facilitates contact between buyers and sellers. It was not until 25 October 2005 that the details regarding these restricted goods were removed from the Huajin entry on the Army- technology.com website. It is unclear why this excision took so long and whether government agencies have undertaken any investigation of this case to establish whether there has been a breach of UK export controls.
In the above cases, while it seemed there was a strong prima facie case meriting serious investigation by the authorities, to the knowledge of the UKWG those cases were not even investigated, never mind prosecuted. For anybody making a risk-reward calculation, the clear message is that the downside to participating in such activity is minimal, and therefore lacks any form of deterrent affect, thus undermining the effectiveness of the trade controls carried out from within the UK. There has been a suggestion that the preferred response of the Government on cases of this type is to work behind the scenes to ensure that the trade does not take place. While this is useful in its own right, the UKWG contends that it is an insufficient response, and disproportionate to the sensitive nature of controlled goods. This reluctance to investigate breaches of the export control system and to impose stiff penalties contrasts with the approach in the US, where for example the ITT Corporation were convicted of a criminal violation and fined US$100 million for illegally sending classified night-vision technology used in military operations to China and Singapore and setting up a front company to escape detection. 7
Trade fairs and other promotional activities
For other readers
Q30 Please provide any evidence which suggests that breaches of controls are taking place at trade fairs and similar events (e.g. trading of military equipment without appropriate licences; promotion of torture equipment or sales to embargoed destinations, etc).
4 UK firm agrees to sell 'torture tools' to Zimbabwe , The Guardian, (March 25, 2005). 5 Army-technology.com website,
4 The UKWG is aware of a number of recent breaches of controls at UK trade fairs, including those where police and customs officers are actually present. This strongly suggests the need both for greater capacity for the enforcement of trade controls at UK trade fairs, and greater outreach to inform attending companies and individuals of their obligations under UK law.
IFSEC policing and security fair, NEC, Birmingham, 24 May 2007 On 24 May 2007 a company representative for Echo Industrial Co. Ltd, Wenzhou, China, displayed three electroshock weapons (licensable under category PL5001(g)), as well as charts and brochures advertising a wider range of electroshock weapons, at the IFSEC security fair at the National Exhibition Centre in Birmingham. The salesman openly demonstrated the weapons to a journalist posing as a buyer, offered to sell “stun guns” at a price of $3.25 each for an order of 10,000, and indicated that the company did not need to obtain any form of export licence from the Chinese authorities since they had previously described the devices as “torches”. When the salesman’s actions were brought to the attention of police officers also present at the fair, the salesman was arrested and subsequently found guilty at Warwick Crown Court for “the sale of prohibited weapons”, according to the West Midlands police press office. Disappointingly, however, while the representative was charged with offences under the Firearms Act 1968, to our knowledge he was not prosecuted for breaching trade controls (promoting restricted goods without a licence according to the Trade in Goods (Control) Order 2003). 8
DSEi defence exhibition, London, 11 September 2007 On 11 September 2007 UK firm Cardiff-based BCB International Ltd and Chinese firm Famous Glory Holdings were found by journalists to be promoting leg-cuffs in their promotional material at the DSEi defence exhibition. BCB International was also advertising a taser electric dart device, while Famous Glory Holdings promotional material also advertised a range of electroshock stun guns and stun batons.9 Although the specifications of the BCB leg-cuffs suggested that they fell outside the 2006 revised version of the PL5001(c) category definition by exceeding 280mm in length, this is largely a deficiency with the re-draft of the category definition. Both cases showed commercial activities clearly counter to the spirit of the Government’s policy not to permit the export or trading of electroshock weapons, leg-irons and shackles; and, in the case of the Chinese firm, apparently a breach of UK trade controls which was not prosecuted.10
Trade controls on UK persons outside the UK – effectiveness (NB: applies only to trading in “Restricted Goods” or “Controlled Goods” to embargoed destinations).
Q31 Please provide any evidence which suggests that UK persons overseas are carrying out trading activities of concern
Information continues to surface that UK citizens and companies are still undertaking commercial activities outside the UK relating to Restricted Goods, in some cases evidently without the requisite licences, over three years after the introduction of the Trade in Goods (Control) Order 2003. Although this sort of trading activity is already captured by the UK’s export controls, these examples point to a need for further outreach work to inform both UK companies and the international industry about the UK’s trade control restrictions.
Imperial Armour (Pty) Ltd, a company based in Durban, South Africa, is managed by Louisa Garland. The company appears to be connected to a former UK company, Imperial Armour
8 For details see memorandum from Mark Thomas to Quadripartite Select Committee (June 2007),
5 Ltd, dissolved in 2006, whose directors included Louisa Garland. The 2005 return filed by Imperial Armour Ltd to Companies House lists Louisa Garland’s nationality as ‘British’, while listing a South African personal address. 11
Until July 2007 Imperial Armour (Pty) Ltd’s website advertised a range of electroshock stun riot shields, stun batons and stun guns: specifically, “Shock Anti-Riot Shields”, “Paralysing Product – Paralyser Compact, Paralyser Special, Paralyser Standard, Paralyser Military, Paralyser Pocket, Paralyser Cobra, Paralyser Python” and “STUN GUNS - 800,000v”.12 This equipment appears to fall into category PL5001(g) - Restricted Goods under the Trade in Goods (Control) Order 2003 - requiring Ms Garland to obtain a UK licence to undertake trading activities in such equipment. To our knowledge this she has not done so.
Images and references to this equipment have subsequently been removed from the company’s website, but in June 2007 Louisa Garland was nonetheless promoting electroshock stun guns at the Securex security equipment fair in Johannesburg, South Africa. An online industry magazine, High Tech Security Solutions, carried an advert for Imperial Armour Stun Guns, stating that “The company will give away a stun gun with every bullet- proof vest bought at Securex. See Imperial Armour at stand A28, hall 1. For more information contact Louisa Garland, Imperial Armour.” 13
Q32 Do you have any other comments or evidence on the effectiveness of the trade controls on the activities of UK persons operating overseas?
Aside from the effectiveness of the current controls, the UKWG has serious concerns about loopholes in the current legislation which allow UK persons to trade controlled goods to sensitive destinations, which undermine the UK’s transfer control regime and stated UK policy.
The ECA provides the Secretary of State with the power to control arms-brokering activities of UK passport-holders wherever located 14 , however the secondary legislation asserts extraterritorial control on arms brokers only where the brokering activities are in relation to long-range missiles or torture equipment, or to embargoed destinations. This allows a UK person to freely broker to areas of conflict all other equipment, including small arms and light weapons, without being within the jurisdiction of UK courts.
One example of the way in which brokers can get around current legislation is Imperial Defence Services who are a UK defence company specialising in exports of small arms and light weapons. While the company is registered and based in the UK, its website clearly states that it has offices or agents in Bulgaria, Cyprus, Nigeria, Australia, South Africa and Vietnam. Arms deals to most destinations and for most types of conventional arms negotiated or supplied via these offices would not be subject to UK export controls. It would appear that this is not a hypothetical scenario (a claim frequently made in the past by the Government when arguing against extraterritorial controls for small arms brokering): the Ranger H-P pistol, which is an upgraded version of the GP-35mm automatic pistol, is listed on the company’s website as follows:
“Produced exclusively for us with the latest production equipment and state of the art CNC machinery and assembled in England, the Ranger H-P Pistol is the ideal weapon for use in close quarter combat situations as well as being equally suitable for use in connection with normal guard duties and police work… The Ranger H-P Pistol can only be obtained from this company, who will either export it to clients from
11 Imperial Armour Ltd (Company number 4140947), 363s Return (29 July 2005). 12 See Imperial Armour website:
6 the UK or from Bulgaria when easier for export licensing procedures to certain destinations .” 15 (emphasis added)
This is a serious loophole in the current regulations and should be address during the current review. For more comments and evidence see Q47, Q48, Q49 and Q50.
AREAS NOT SPECIFICALLY COVERED IN SECTION 1
If you feel that there are matters concerning the business impact or effectiveness of the 2004 controls that have not been addressed in this paper, please provide any comments and supporting evidence using the box below.
The Export Control Organisation (ECO) Internal Evaluation takes an overly simplistic approach to evaluating the effectiveness of the Control Orders. Government claims to enhancing the effectiveness of controls are based in some cases on refusals (eg on intangible transfers) while in other cases on a lack of refusals (eg relating to extraterritorial activities), but without any apparent serious effort to consider the impact of those individuals and companies that choose to ignore the licensing system altogether. The UKWG acknowledges that such a calculation is very difficult, however the Government appears to have done little to take into account the evidence that is either publicly available (eg see below and in Q30 and Q32 for information on the effectiveness of trade controls) or that it may have access to information through other non-public channels. Furthermore, the Government limits its analysis to the number of licences approved and/or refused, without considering other aspects of effectiveness such as enforcement, and whether the controls complement the Government’s counter-proliferation aims and its broader support for human rights.
UK legislation on transfer controls is undermined by ineffective enforcement. In particular, the reluctance to investigate breaches, prosecute offenders and impose stiff penalties does not send a strong deterrent message that the UK is determined to act against offenders of the controls.
While enforcement is not an issue that necessarily requires legislative change, it is critical to the effectiveness of the ECA and the contingent control orders. The UKWG has serious concerns that not enough resources are being allocated to the implementation of the existing regime, therefore undermining the ability of the controls to be strictly enforced. In particular, there are several issues that give us cause for concern, such as:
• cuts in staff numbers at the ECO; • the failure to include arms transfers among the subjects listed on the Customs Confidential website until alerted by the Quad Committee; and • the possible lack of capacity and inclination of HMRC to deal with transfer control issues (as according to the evidence provided by the defence industry to the Quad Committee in January 2006 16 ).
The UKWG also has significant concerns regarding a possible lack of inclination to enforce the controls where evidence comes to light that companies or individuals may be in breach.
Between 2000 and 2006 the Government has reported that successful prosecutions and penalties for breaches of the ECA were brought against just seven firms. 17 These have for the
15 See Imperial Defence Services website:
7 most part been for relatively minor and on occasion procedural offences, and subject to minimal penalty. The most significant prosecution was in relation to systematic and repeated efforts by the company Multicore to procure and smuggle components for the Iranian military, yet the punishment was limited to one individual receiving an 18-month prison sentence suspended for two years, a ban from being a company director for ten years, and an order for seizure of assets of approximately £70,000. 18 This appears to be a relatively low level of enforcement, given that, according to a Parliamentary Question 19 posed by John Bercow MP on 22 March 2006; there were 504 breaches of the arms export controls between 2000 and 2005. This covered export seizures and unlicensed exports referred to HMRC by compliance officers from the DTI. Furthermore, the Government reported that in 2006 alone compliance officers had found failures of compliance by approximately 330 holders of two licence types (Open Individual and Open General licences) visited by compliance officers. 20 While the Government did not disclose what proportion of these non-compliant licence holders were seriously non-compliant, rather than just guilty of inadvertent administrative errors, there nonetheless appears to be a disturbing level of non-compliance.
There have also been a number of cases where the authorities have failed to launch or even pursue prosecutions when there would appear to be strong grounds for doing so. For example, the brokering and trafficking of torture equipment is clearly prohibited under UK legislation. Yet evidence has previously been provided to the Quad Committee by Mark Thomas (comedian and political journalist) regarding the promotion of torture equipment at the DSEi arms fair in 2005 and on the websites of UK-based companies. 21 In particular, this included openly advertising the supply of electro-shock batons and leg-irons in its brochures. When these cases were brought to the attention of the authorities, the offending stands were closed down and the information on the websites was removed, but to the knowledge of the UKWG no efforts were made to bring forward prosecutions. Furthermore, given an estimated policing bill of DSEi 2005 of £4 million 22 , it is worrying that the only policing of compliance with UK export controls on torture equipment appears to have been carried out by an investigative journalist.
The UKWG is also concerned that penalties levied for serious breaches of UK export controls are often considerably lower than in other countries, particularly the US; and indeed so low in some cases that the cost of compliance with export controls may well be higher than the cost of potential penalties for non-compliance.
For example, on 27 July 2007 HMRCs prosecution office announced that during 2005 Avocado Research Chemicals Ltd had unlawfully exported two controlled chemicals to a broker in Egypt: 100g of 2-diisopropylaminoethyl chloride hydrochloride, a possible precursor to VX gas; and 10g of hafnium, which can be used in the production of nuclear fuel rods. This was only discovered in 2006 when Avocado sent its annual return of Chemical Weapons Convention-related chemicals exports to the DTI and officials noticed that the necessary licences had not been obtained, although the firm appears to have been permitted to make a ‘voluntary disclosure’ of the exports after this detection. Despite having exported licensable chemical weapons precursors and chemicals which could be used in nuclear technology to Egypt, a non-signatory to the Chemical Weapons Convention, the company was fined just £600 (plus £100 in costs). 23
18 As previously detailed in the First Joint Report of the Quadripartite Select Committee (17 July 2000); UK Strategic Export Controls Annual Report 2004; UK Strategic Export Controls Quarterly Reports for January-December 2005; and Licensing Policy and Parliamentary Scrutiny, HC 873 (3 August 2006) paras. 120-122,
8 If the Government is to effectively discourage and prevent illicit arms and dual-use exports, and maintain the confidence of Parliament and the electorate in the export control system, it must be clear that where there is reason to suspect illegal activity, the Government will investigate thoroughly and prosecute offenders wherever possible. It is imperative that mechanisms are established to enforce controls properly and that resources are allocated accordingly.
The UKWG recommends that during the review process, the issue of enforcement should be high on the agenda. Two possible change options should be considered: 1. the introduction of civil penalties; and 2. the creation of a single compliance agency.
1. Civil penalties
Under Section 7(1) (g) of the ECA, the Government has provided provisions to create “indictable offences, summary offences or offences triable either way” for those who breach the export regulations. While the UKWG commends the Government for establishing strict criminal liability for breaches to the ECA and any Orders established underneath it, as is discussed above, enforcement of the ECA is often a very difficult and cumbersome task, with only seven prosecutions since 2000 24 .
One of the main difficulties for a successful criminal prosecution is that the burden of proof is extremely high, requiring the prosecutor to disprove all possible defences. In cases involving exports of controlled goods, building evidence so as to meet the burden of proof can often be very difficult. Readily available evidence and disclosure of materials can often present particular difficulties. Furthermore, considering the nature of the types of offences, there can be particular difficulties in cases where offences are committed overseas or involving actors that are not based in the UK. Enforcement difficulties are compounded where the offence relates to a supply or transfer that other states might consider legitimate trade. In these circumstances, the UK Government may not expect the same level of co-operation from an overseas Government as for activity which is universally condemned.
The UKWG recommends that section 7 of the ECA be amended to include civil penalties as well as the current criminal sanctions. A civil penalty can be imposed upon the offence being proved “on the balance of probabilities”, as opposed to “beyond reasonable doubt” (a lower burden of proof). As for penalties, there is no reason in principle why such penalties cannot be unlimited. For instance, the Financial Services Authority (FSA) has the power to impose unlimited fines in relation to market abuse. This would have a greater deterrent effect on corporations. It would create an incentive for those who stand too lose financially and would generate a more cooperative stance for those under investigation. Furthermore, the introduction of civil penalties would not replace criminal sanctions for those cases which pass the evidential and disclosure requirements. Civil penalties would be included as an additional tool in the toolbox for enforcement of the regulations. The creation of a new civil penalty in the transfer control regime would enable a greater number of breaches to be successfully pursued and thereby create a stronger deterrent effect.
2. Single compliance agency
The second change option would be to create a single compliancy agency. By drawing together expertise and co-ordinating implementation and enforcement within one agency would assist in the implementation, detection, investigation and prosecution of offences under the ECA. This would be regulated by the civil service and draw together the personnel, experience and authority of the Department of Business and Regulatory Reform (BERR) and the controlled goods section of HMRC to create a unified organisation for the compliance and enforcement of export controls. The advantages of creating a single compliance agency would be:
9 ••• the building of expertise; ••• increasing effective monitoring by bringing together regulation and enforcement; and ••• being more effective at promulgating standards and awareness.
In other areas there has been much success by the creation of single compliancy agencies, such as the FSA and the Serious Fraud Office. This principle would also appear to have been accepted with regard to the recent creation of the Serious and Organised Crime Agency. However, proper funding would also need to be made available to ensure that the agency has sufficient staff and other resources to pursue actively its remit.
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QUESTIONS ARISING FROM SECTION 2: POSSIBLE CHANGE OPTIONS
Trade Controls/ “Restricted Goods”
Section 2.1 explained which goods are currently subject to more stringent controls, through being classified as Restricted Goods, and suggested a number of categories of equipment to which Restricted Goods categorisation might be extended. It also explained the concept of introducing a new category of Partially Restricted Goods to which some extra controls would apply.
The table below invites you to express your views on whether any of the potential changes listed there should be enacted. For each item listed, please mark an x in the relevant box to show which treatment you think should apply.
Equipment Treat as Treat as New Treat as category “Restricted Middle Category; “Controlled Goods” “Partially Goods” Restricted Goods” Long Range Missiles UAVs Small Arms and Light Weapons, associated ammunition MANPADs Dumb Cluster Munitions
For all readers
Long Range Missiles/UAVs
Q45 If you think that either or both of these should move out of the “Restricted Goods” category, please say why and any provide any evidence you have
10 that the current controls are too strict.
Proceeding from the principle that the Restricted Goods category is most appropriate for items that can be regarded as fundamentally illegitimate, such as equipment for use in torture, anti-personnel landmines, cluster munitions (see Q49 below) and other categories of prohibited weapons, it would seem reasonable for long-range missiles and UAVs to be classified as ‘Partially Restricted Goods’. This is on the understanding that while there are occasions where the transfer of these types of goods may be classed as legitimate, they are still of such sensitivity as to warrant the extra control of extraterritoriality. All specially- designed production equipment and accessories for these same items should also be included in this category. The composition of the Partially Restricted Goods category should be subject to regular review with scope to add additional items when evidence points to a particular risk.
Q46 Should UAVs be categorised differently from long range missiles, or should the same controls apply to both? Please provide reasoning and evidence to support your view.
See Q45 above.
Small Arms and Light Weapons (SALW)
Q47 If you think that SALW and ammunition should be subject to a more stringent category of control, please say why and provide any evidence you have in support of this. (text inserted)
The ECA provides the Secretary of State with the power to control arms-brokering activities of UK passport-holders wherever located 25 , however the secondary legislation asserts extraterritorial control on arms brokers only where the brokering activities are in relation to long-range missiles or torture equipment, or to embargoed destinations. This allows a UK person to freely broker all other equipment, including small arms and light weapons and ammunition to inherently undesirable locations and to areas of conflict, without being within the jurisdiction of UK courts. The inherent proliferation risks associated with the transfer of SALW and ammunition into conflict zones, the fact that these are typically the weapons of choice for militia and human-rights abusers, and the evidence that illicit brokering activities takes place along complex international networks means an extra-territorial dimension to these controls beyond embargoed destinations is both necessary and urgent.
One example of the way in which brokers can get around current legislation is provided by Imperial Defence Services, a UK defence company specialising in exports of small arms and light weapons. While the company is registered and based in the UK, its website clearly states that it has offices or agents in Bulgaria, Cyprus, Nigeria, Australia, South Africa and Vietnam. Arms deals to most destinations and for most types of conventional arms negotiated or supplied via these offices would not be subject to UK export controls. It would appear that this is not a hypothetical scenario (a claim frequently made in the past by the Government when arguing against extraterritorial controls for small arms brokering): the Ranger H-P pistol, which is an upgraded version of the GP-35mm automatic pistol, is listed on the company’s website as follows:
“Produced exclusively for us with the latest production equipment and state of the art CNC machinery and assembled in England, the Ranger H-P Pistol is the ideal weapon for use in close quarter combat situations as well as being equally suitable for use in connection with normal guard duties and police work… The Ranger H-P Pistol can only be obtained from this company, who will either export it to clients from
25 Section 4(8), Export Control Act 2002.
11 the UK or from Bulgaria when easier for export licensing procedures to certain destinations.” (emphasis added) 26
Furthermore, while current extraterritorial controls cover brokering of all controlled goods to embargoed destinations, this approach does not have the requisite strength to fully prevent arms from reaching highly sensitive destinations, which must be the reason for implementing the controls in the first place. Embargoes are often reactive – arms transfers in the weeks and months preceding the imposition of an embargo may result in human rights violations and the escalation of conflict, yet under the proposed system transfers brokered offshore to such ‘pre- embargo’ destinations would not be controlled. In limiting the controls to cover only embargoed destinations or a special category of goods, the Government does nothing to prevent brokers organising shipments of controlled goods, such as small arms and light weapons (SALW), to conflict zones or neighbouring states, which might then be re-exported to an embargoed destination.
In July 2005, Amnesty International documented the role of three British-based companies involved in the supply of over 240 metric tonnes of arms and ammunition from Albania to Rwanda for onward shipment to armed opposition groups in the eastern Democratic Republic of Congo (DRC).27 These deliveries were made by UK-based air-company African International Airways and included several million rounds of ammunition and at least one shipment contained grenades and rocket launchers. As long as these types of traders are careful to arrange their efforts so that their brokering activities take place offshore, they would still under current legislation be able to act with impunity.
The concerns regarding the trade of SALW and ammunition have been reflected in the international arena. As highlighted in the DTI Consultative Document, there have been many agreements and guidelines developed to reflect growing concerns that SALW are finding their way to sensitive destinations and conflict zones. The Government has played a strategic role in pushing for tighter controls on SALW at the international level, including through the UN Programme of Action on SALW (UN PoA) and as one of the drivers for an international Arms Trade Treaty (ATT). The UKs standing, reputation and credibility to advance these initiatives will be undermined if they do not attempt to close current loopholes in national legislation.
MANPADs
Q48 If you think that MANPADs should be subject to a more stringent category of control, please say why and provide any evidence you have in support of this.
As discussed in Q45 above, the UKWG understands the rationale for moving MANPADs into the Partially Restricted Goods category (given that the transfer of MANPADs may sometimes be classed as legitimate). All specially designed production equipment and components etc. for these same items should also be included in this category. The use of MANPADs by unauthorised personnel is widely perceived as a growing threat to international security, and has been singled out for specific attention in international and regional forums. For example, under the Wassenaar Arrangement and the Organisation Security and Co-operation in Europe (OSCE), states have agreed not to transfer MANPADs to non-governmental end- users, not to use non-governmental brokers in the transfer of MANPADs and to ensure that the recipient government pledges not to re-export the weapons without the prior consent of the original exporting government. Strict national controls over the transfer of MANPADs are essential to preventing access by unauthorised personnel to these weapons. In order to ensure that it is honouring its international commitments, the UK Government should ensure that national legislation contains all these elements contained therein.
26 See Imperial Defence Services website:
12
Dumb Cluster Munitions
Dumb Cluster Munitions
Q49 If you think that dumb cluster munitions should be subject to a more stringent category of control, please say why and provide any evidence you have in support of this.
The UKWG recommends that all cluster munitions and their components fall within the Restricted Goods category, thus placing them under full extraterritorial control, and effectively outlawing the brokering of such items. The review of the ECA should reflect the UK Government’s commitment to the Oslo Declaration for an international treaty banning cluster munitions that cause unacceptable harm, and place cluster munitions under the same controls as other prohibition goods such as torture equipment and landmines.
The UK Government has drawn a distinction between ‘dumb’ cluster munitions 28 and other cluster munitions. However this distinction is not widely accepted by other states nor is it accepted by independent technical experts or humanitarian organisations. Furthermore UK Government policy on cluster munitions is at odds with the evidence from recent use of these weapons in conflicts such as that between Israel and Hezbollah in 2006. 29 The UK Government endorsed the Oslo Declaration at the Oslo Conference on Cluster Munitions and is involved in the Oslo Process. 30 This sets out a timetable to conclude a new instrument prohibiting by 2008 the use, production, transfer and stockpiling of cluster munitions that cause unacceptable harm to civilians. The International Committee of the Red Cross (ICRC), UN Secretary General and UN agencies are all participating actively in and supporting the Oslo Process. 31
The UKWG is therefore of the opinion that the review should reject the distinction between dumb and ‘smart’ cluster munitions and include all cluster munitions under the Restricted Goods category. All types of cluster munitions currently stockpiled by the UK pose the same sorts of dangers to civilians because of their wide area effects and the large numbers of unexploded ordnance they leave behind. Research conducted by Norwegian Defence Research Establishment (NDRE) at two clearance sites in southern Lebanon has shown
28 In a Ministerial Statement Dr Kim Howles stated “Our understanding of a ‘dumb’ cluster munition is one that has numerous submunitions, each of which has an explosive content. Additionally, the submunitions either do not have a target discrimination capability or they do not have a self-destruct, self-neutralisation or self-deactivation capability” House of Commons Ministerial Statements (4 December 2006) Column 1WS. 29 See correspondence from Ove Dullum, Chief Scientist, Norwegian Defence Research Establishment to Richard Moyes, , in Report by Landmine Action to the House of Commons, Foreign Affairs Select Committee, in response to Paragraph 15 of its report ‘Global Security: The Middle East, Eighth Report of Session 2006-2007, 25 July 2007’, (10 September 2007). 30 In February 2007, the UK, along with 45 other countries, pledged to work towards a new treaty banning cluster munitions by 2008. The declaration was signed in Oslo, and sets out a timetable for agreeing a new treaty. 31 The Common UN position on cluster munitions taken by all UN Agencies and the UNSG and announced in Oslo on 19 September is as follows: The UN: 1. Calls on Member States to address immediately the horrendous humanitarian, human rights and development effects of cluster munitions by concluding a legally binding instrument of international humanitarian law that: • prohibits the use, development, production, stockpiling and transfer of cluster munitions that cause unacceptable harm to civilians; • requires the destruction of current stockpiles of those munitions; and • provides for clearance, risk education and other risk mitigation activities, victim assistance, assistance and cooperation, and compliance and transparency measures. 2. Until such a treaty is adopted, the UN calls on Member States to take domestic measures to immediately freeze the use and transfer of all cluster munitions. 32 Grethe Ostern, The Reliability of the M85 bomblet: Tests vs reality - lessons learned from Norway and Lebanon , Norwegian People's Aid. 33 See correspondence from Ove Dullum, Chief Scientist, Norwegian Defence Research Establishment to Richard Moyes, , in Report by Landmine Action to the House of Commons, Foreign Affairs Select Committee, in response to Paragraph 15 of its report ‘Global Security: The Middle East, Eighth Report of Session 2006-2007, 25 July 2007’, (10 September 2007). 34 Evidence submitted by Chris Clark at UNMASS in Lebanon to the Foreign Affairs Committee (11 May 2007).
13 failure rates of the M85 cluster munitions with self-destruct mechanisms of 13.2 percent and 12.2 percent respectively. 32 The NDRE is the body responsible for overseeing munitions tests in Norway, where the UK tested its own M85 cluster munitions last year. 33 Also the UN in Southern Lebanon has stated that it has found large numbers of unexploded M85 cluster munitions with self-destruct mechanisms after they were used by Israel during the conflict with Hezbollah. 34 The Oslo Process aims to ban cluster munitions that cause unacceptable harm to civilians , which, on the basis of the evidence from the war in Lebanon, would include all types stockpiled by the UK, rendering the distinction between ‘dumb’ and ‘smart’ dubious at best.
The UKWG therefore recommends that the review place all cluster munitions under the Restricted Goods category in anticipation of the outcome of the Oslo Process in 2008, amending the Order to include all Cluster Munitions.
N.B. Discussions regarding the definition of cluster munitions and submunitions are ongoing.
Q50 Are there any other types of controlled goods, or specific activities, that you believe should be subject to more stringent control? If so please:
Say which goods
All other controlled goods, their components and related software and technologies
Say whether you think these should be treated as “Partially Restricted Goods” or “Restricted Goods”
Partially Restricted
Only those goods which have a legitimate use should be in the Partially Restricted category, for all other controlled goods which never has a legitimate use, such as torture equipment, should be placed in the restricted category. (see Q45 above)
Provide reasoning and evidence of the scale of the problem which you would wish to address
The UKWG maintains that exterritorial controls on UK arms brokers should be the rule rather than the exception. Therefore, rather than structuring the control orders so that extraterritorial control of UK arms brokers is limited to a few special categories of goods or destinations, in order to close existing loopholes the Government should honour its manifesto pledge and start from the premise that all arms brokering activities of UK passport-holders should be controlled, wherever they are located.
During the passage of the ECA a number of amendments were proposed to introduce full extraterritorial controls on brokers, but were rejected by the Government. The Quad Committee have made 34 recommendations calling for the introduction of full extraterritorial controls on arms brokering 35 , highlighting that the Government has failed to meet its 2001 Manifesto commitment to control traffickers and brokers “wherever they are located” .36 The ECA Review provides a timely opportunity for the Government to honour this commitment.
Precedent for the exercise of extraterritorial jurisdiction in the UK exists, and not only within the ECA itself. There are 24 separate pieces of legislation already on the statute books under
35 Westminster Hall Debates (22 February 2007) Column 159WH. 36 Labour Party Manifesto 2001.
14 which offences can be prosecuted in the UK under criminal proceedings when they are committed overseas 37 . This includes the Criminal Justice Act 1988, the Merchant Shipping Act 1995, Offences Against the Person Act 1861, the Sexual Offenders Act 2003 and the Anti-terrorism, Crime and Security Act 2001. Given that the UK already asserts extraterritorial jurisdiction, and has already conceded to the principles of extraterritoriality for long-range missiles and instruments of torture and for goods to embargoed destinations, it would seem the Government’s arguments against extending the current controls under the ECA are undermined by current practice. Furthermore, there is no legal impediment to creating full extraterritorial legislation in principle. Parliament can regulate and criminalise any type of activity it sees fit.
In 1996, the Home Office published a set of criteria to assist it in considering whether offences should have extraterritorial effect. These guidelines recommended that extension of jurisdiction could be considered where at least one of the following factors was present:
1. where the offence is serious (this might be defined in respect of existing offences, by referred to the length of sentence currently available); 2. where, by virtue of the nature of the offence, the witnesses and evidence necessary for the prosecution are likely to be available in UK territory, even though the offence was committed outside the jurisdiction; 3. where there is international consensus that certain conduct is reprehensible and that concerted action is needed involving the taking of extra-territorial jurisdiction; 4. where the vulnerability of the victim makes it particularly important to be able to tackle instances of the offence; 5. where it appears to be in the interests of the standing and reputations of the UK in the international community; and 6. where there is a danger that offences would otherwise not be justiciable.
Arms brokering meets at least five 38 of the six Home Office criteria for determining whether extra-territorial legislation is appropriate.
Government arguments have focused strongly on the need for an activity to be universally condemned before extraterritorial control can be considered. However, while within the ECA this argument applies to the controls in place to prevent brokering equipment to countries under UN embargo, the same cannot be said for brokering equipment to countries under OSCE, EU or unilateral embargoes, or for brokering long-range missiles or certain equipment for use in torture.
Furthermore, in the Anti-terrorism, Crime and Security Act 2002 the Government legislated that bribery and corruption committed outside the UK constituted an offence, even though in many jurisdictions this activity is not criminalised. In the Home Office consultation paper issued in June 2002 on this issue, the Government set out its reasoning for introducing such controls in relation to corruption. It stated:
"We have also considered whether we should go further and extend nationality jurisdiction to such an offence, recognising that this could send a strong deterrent message that the UK is determined to act against corruption wherever it occurs. This is a message that will have a real persuasive and dissuasive force . . . The Government, while recognising the practical problems associated with the prosecution of extra-territorial offences, believes that the balance of advantage rests with assuming jurisdiction over its nationals for offences of corruption committed abroad. Such an assumption of jurisdiction would put beyond doubt the UK's commitment to join forces with the international community and the fight against corruption". 39
37 Quadripartite Select Committee oral evidence with Margaret Beckett (15 March 2007) Question 275,
15
This reasoning adopted for the Anti-terrorism Act is directly relevant to arms brokering controls, especially controlling the brokering of SALW which, where it facilitates the supply of weapons used in conflict or criminal violence, is the cause of countless deaths and hardship in many parts of the world. Thus the UK must send a clear message that the Government is fully determined to act against illicit brokering wherever it occurs. Moreover, in the case of arms brokering, one of the reasons extraterritorial control is necessary is precisely because some countries do not themselves regulate brokering.
One of the benefits of introducing fuller licensing requirements for brokering and trafficking activities is that it could actually make it easier to regulate the trade. At present, given the notorious complexities of deals operating across different geographic jurisdictions using a complex labyrinth of companies involved in the supply chain, it becomes extremely difficult for enforcement agencies to prove a deliberate attempt by a UK citizen or company to breach an international arms embargo and to bring this to successful prosecution through the court system. This is borne out by evidence that no successful prosecutions have taken place and that several cases have been dropped on the grounds of insufficient evidence. Under a more comprehensive licensing system, it would be much easier to determine whether or not a UK entity was involved in a licensable transaction, irrespective of the ultimate destination of the equipment. Moreover, it is worth re-stating the purpose of introducing controls in this area is to prevent UK arms brokers from supplying military equipment to destinations where such equipment could be used in violation of either the Relevant Consequences or indeed the criteria contained within the EU Code of Conduct. The best way of ensuring that UK brokers do not contribute to human suffering is to place them firmly within an export licensing framework.
Furthermore, the Government have worked hard to position themselves as playing a leading role in international attempts to develop more responsible attitudes towards the arms trade by showing great leadership on the ATT initiative and the UN PoA. Their standing, reputation and credibility to advance these initiatives will be undermined if they do not attempt to close current loopholes in national legislation.
While it is acknowledged that enforcement in relation to extraterritorial activities is not easy (see section 1 above), mechanisms are in any event already established to enforce controls on the three 40 current categories in respect of which the Government already applies extraterritorial controls. These same systems can obviously be adapted and utilised in order to control brokering.
With regards to the practicality of imposing full extraterritorial controls for all controlled goods, their components, technology and related software, the Government should utilise the current Open General Licence system in place to cover the majority of the non-sensitive trading activities as has already been employed for the current trading regulations. As noted in the ECO Internal Evaluation, the administrative burden for bringing in the current trading controls was not as burdensome as initially forecasted by the Regulatory Impact Assessment.
For all readers
Other categories of equipment
This box provides space for any other comments that you might have on the treatment of “Restricted Goods”. If you think that particular categories of goods (other than SALW, MANPADs, or dumb cluster munitions) should be subject to more rigorous control, then please state what the goods are, and whether they should be classified as “Partially Restricted Goods” or “Restricted Goods”, with supporting arguments and evidence.
16 Goods category Treat as “Restricted Treat as Partially Goods” (yes/no) Restricted Goods (yes/no) All other controlled goods Components for controlled goods Technology and software for controlled goods
Supporting arguments and evidence
See Q50 above for rationale.
Provision of transport services
For all readers
Q78 Please provide any evidence that UK transport providers are transporting “Restricted Goods” between third countries, or transporting other “Controlled Goods” to embargoed destinations
Several recent reports have alleged that UK transport providers have recently transported, or attempted to transport, controlled goods to embargoed destinations. If accurate, they underline the need to bring ancillary services such as transportation explicitly within the remit of export controls. The first case illustrates the role of transport providers in supplying arms to undesirable destinations. The second, if criminal charges prove founded, illustrates the propensity of unscrupulous arms brokers to ‘reinvent’ themselves as transport agents as national controls on arms brokering increase: in this case, a UK-based broker allegedly used a US agent to procure military goods which were simply to be shipped by the UK broker’s freight company, while nonetheless allegedly receiving a share of the profits for the entire deal.
The Sunday Times reported in April 2007 that ammunition was supplied to the Sudan People’s Liberation Army by an Antonov-28 cargo aircraft flying from Yei to Juba, Sudan, on November 23 2006. 41 The report claimed that the Antonov aircraft was registered to a UK company, Dallex Trade Ltd. The UKWG has been unable to confirm the veracity of this report, but is concerned that the provision of such transport services would contravene the EC embargo on “all services related to military activities and to the provision, manufacture, maintenance and use of arms and related materiel of all types”. 42
On 25 January 2007 a US ‘export broker’, Robert Caldwell, was arrested in Texas, USA. Caldwell was accused of conspiring with a UK businessman, Christopher Tappin, and Tappin's freighting company, Brooklands International Freight Services Ltd, to supply batteries for Hawk ground-to-air missiles to Iran via the Netherlands without the necessary licences. The Criminal Complaint filed in Texas against Caldwell and Tappin describes how undercover agents for the US Immigration and Customs Enforcement Services intercepted an attempt by Tappin’s business partner to procure the missile batteries from the US; established a front company to which Tappin subsequently directed commercial requests for the missile
41 British firm breaks Sudan arms boycott , The Sunday Times (UK) (22 April 2007). 42 See European Council Common Position 2005/411/CFSP and the Sudan (Technical Assistance and Financing and Financial Assistance) (Penalties and Licences) Regulations 2004.
17 batteries; and obtained a computer file detailing previous attempts by Tappin and the cooperating to obtain batteries for an Iranian customer. 43 Tappin does not appear to have been arrested or tried in the USA.
These cases are indicative of the wider global problem which concerns the regulations covering ancillary services. There is an urgent need to bring those involved in the transportation, freight-forwarding or financing of defence transfers into the transfer control process. There are several reasons for this. As more jurisdictions introduce controls on arms traffickers, brokers are tending to reinvent themselves as transporters, and thereby to once more step beyond the law. These brokers are typically adept at creating vastly complicated deal structures involving myriad participants, whereby isolating brokering responsibilities becomes increasingly difficult for authorities. In recent years the UN, the media and NGOs have all uncovered evidence of involvement by UK citizens in transporting arms in obvious opposition to UK licensing policy. Regulating the activities of the transporters would help to address this problem. As the Quad Committee have noted “it would… seem perverse that those arranging for arms to be purchased for use in some area of conflict should be under a licensing regime, but not those responsible for their actual transfer.” 44
Furthermore, tracing transportation is more straightforward than tracing brokering paperwork. There is also the possibility of seizing the means of transportation, which would create an incentive for those who would stand to lose their plane or vessel to ensure that they were not involved in an illicit transfer.
Tighter regulation of the transportation and financial industries would also provide an opportunity to strengthen and enforce the current controls. Creating obligations for these types of businesses, for whom dealing with regulatory and administrative regimes is fundamental, but for whom any single shipment would be peripheral, could be a way of enlisting them as allies in the battle to reduce the incidence of licensable trades that are taking place without licences being applied for. This should be a priority for the defence industry that claims to be legitimate and fully compliant. It would bring more people engaged in these activities into the licensing regime. Creating obligations on transporters and freight forwarders and other ancillary service providers such as financial and insurance companies may be an effective way of bringing a greater number of inadvertent law-breakers within the transfer control-conscious community.
Therefore, the UKWG would recommend that the Government amend section 5 of the ECA, to provide that:
controls of any kind may be imposed for the purpose of regulating the ancillary services utilised in order to facilitate the movement of controlled goods .
Subject to this provision, ancillary services shall be defined as those UK persons who do any act, or agree to do any act, calculated to facilitate the acquisition or disposal of controlled goods, including those involved in the transportation, freight-forwarding, financial services or any other action
Q79 Do you think that transport providers should be:
Required, by legislation, to obtain documentary evidence that the overseas transfer for which they are providing transport has been approved by the relevant licensing authorities? If so, why
43 United States District Court, Western District of Texas, Affidavit attached to Criminal Complaint in Case No. SA-07- 50-(1,2)M, (26 January 2007). 44 Quadripartite Select Committee Report Draft Export Control and Non-Proliferation Bill (01 May 2001) paragraph 99.
18 While the transit/transhipment regulations are in place to facilitate legitimate trade by allowing goods to pass through the UK, the UKWG is concerned that the current regulations may contain loopholes that permit illegitimate trade. The Export of Goods, Transfer of Technology and Provision of Technical Assistance Control Order allows controlled goods to transit through the UK without a licence as long as certain conditions are met. There are some limitations to this: the transit regulation does not apply to a range of sensitive goods (which includes landmines, torture and paramilitary equipment, or to any goods destined for use in a Weapons of Mass Destruction (WMD) programme or to certain sensitive destinations (which includes all embargoed states and Iran, Iraq, Libya and North Korea). 45 In practice this means that all other controlled goods, including SALW, can transit through the UK without a licence to any destination not caught under the limitations, so long as the conditions in the Control Order are met. These conditions are that:
a. the goods do not remain in the UK for longer than 30 days, and must remain on board a vessel or aircraft, or be on a through bill of lading or through air waybill; b. the destination of the goods has been determined in the original exporting country and has not been changed prior to their exportation from the UK; and c. the goods in question were exported from that country in accordance with their laws relating to the exportation of goods.
However, under the Control Order, aside from providing an air waybill or bill of landing, the freight forwarder is required to provide no further documentation in order to transit through the UK. This means that in practice HMRC is powerless to confirm that the goods in question have been exported in accordance with the laws of the original exporting country, or that the final destination has not been changed. While the Regulations do put in place some limitations on transit, those limitations are effectively unenforceable.
Furthermore, air waybills are not standardised or regulated. They are raised by the freight forwarding company and can provide as much or as little information as they decide, including with regard to how equipment is described. As there are no regulations on the quality of information provided on an air waybill, there is little obligation to freight forwarders to be transparent. Therefore, even if HMRC did want to fully enforce the transit regulations, aside from prior intelligence or doing spot checks, it would be a convoluted task to verify the accuracy of an air waybill.
The UKWG recommends that the Control Order is amended. Freight forwarders who transit controlled goods through the UK should submit to HMRC, prior to transit:
• a written confirmation of the route and destination of the goods to be transited; • a copy of the authorised licence from the original exporting state; • a copy of the documentation provided from the ultimate destination such as an end- use certificate or international import certificate; and • a declaration of the type equipment being transferred.
This would provide HMRC with prior notification of any controlled goods being transited through the UK and their final destination, and would assist HMRC with their abilities to enforce the current controls.
At a wider level, the UK Government should look to negotiate with the EU and further a-field, to create more stringent controls on transit. As discussed above, as more jurisdictions introduce controls on arms traffickers, brokers are tending to reinvent themselves as transporters to stay beyond the law. These brokers create vastly complicated deal structures involving myriad participants, whereby isolating brokering responsibilities becomes increasingly difficult for authorities. Regulating the activities of the transporters would help to address this problem. Controlling the transporters and means of transportation would assist in controlling the brokering of illicit goods. Thus, effective transit controls are a major part of efforts to prevent and combat the illicit trade in controlled goods, especially to undesirable and
45 See Section 11, Paragraph 11, Export of Goods, Transfer of Technology and Provision of Technical Assistance (Control) Order 2002.
19 embargoed destinations. Evidence of weak transit controls can be found in the reports of the various UN Panels of Experts established to investigate violations of the sanctions against UNITA, Sierra Leone and Somalia. However, despite the importance of transit controls, this aspect has yet to become a major subject for international debate. Therefore, it should be a key priority for the UK Government to put in place both stringent national and regional transit controls, as well as to look towards developing international standards to prevent controlled goods being moved to undesirable end-users.
Overseas production of military equipment by UK owned or linked companies
For all readers:
Q83 Do you have evidence to indicate that an overseas licensed production facility, or an overseas subsidiary of a UK parent company has exported an end product to an undesirable end-user? If so, please give details:
One pertinent case which involves goods for which (when they left the UK for further processing overseas) no UK licence was required, but which would have required a licence if exported from the UK in the form in which they subsequently left the overseas production facility, involves Turkish made Land Rover Defender 110 military vehicles. The vehicles were produced under licence from the UK by the Turkish company Otokar. 70 percent of the components were exported from the UK in kit form from Land Rover for Turkish assembly into military vehicles. As the components were not specifically adapted military components, they were classified as no licence required (NLR) items, notwithstanding the fact that they are clearly sold as military vehicle kits. They were subsequently gifted from the Turkish Government to the Uzbek Government, and were consequently used by Uzbek troops during the Andijan massacre in May 2005. This is a clear-cut case of an example of an overseas licensed production facility which clearly undermines the UK Government’s counter proliferation aims, and its broader support for international human rights. It is very unlikely that Land Rover Defender vehicles of this specification would have been licensed by HMG for direct export to Uzbekistan, or to Turkey if the ultimate destination were known.
The case of Ashok Leyland and its negotiations to supply military trucks to Sudan shows the pitfalls of not applying controls to overseas subsidiaries. On 17 February 2005, the Indian- based company, Ashok Leyland, announced at the IDEX 2005 defence exhibition that it had signed a deal to supply Stallion Mark III 4X4 army trucks to Sudan. In March 2005 Janes Defence Weekly reported that Ashok Leyland had signed a contract for an initial 100 Mk III vehicles. Sudan has been the subject of an EU arms embargo since March 1994. Ashok Leyland is a subsidiary of a UK company, Land Rover Leyland International Holdings (LRLIH). Moreover, the UK-based family, the Hindujas, hold a 70 percent stake in LRLIH. The supply of such vehicles would be illegal from the UK under current embargo legislation, but this does not apply to subsidiaries of UK companies.
Land Systems OMC in South Africa is a subsidiary of the UK company BAE Systems. BAE Systems holds a 75 percent share in the South African company. The South African-based company has sold armoured vehicles to nearly 40 countries around the world. The South African government submissions to the UN Arms Register between 2000 and 2004 identify exports of armoured vehicles, originally manufactured by OMC, to over 20 countries, including India (for use in Kashmir), the Ivory Coast, Nepal and Uganda. Exports to some of these destinations would raise serious concerns under the Consolidated Criteria if exported directly by the UK parent company.
Do you think that:
20
The granting of production rights to an overseas facility should require a licence?
Yes
Licences for the export of listed goods or technology from the UK to an overseas LPO or subsidiary, should stipulate conditions on the commercial contract governing that supply?
Yes
Controls in this area should remain as they are?
No
Please provide supporting reasoning and evidence to justify your choice above.
The globalisation of the arms industry has created many challenges for export controls. In particular the ongoing breakdown of national barriers to the defence industry has seen a proliferation of producers; the trend of UK defence companies to establish manufacturing facilities overseas is likely to grow. This has massive implications for the UK in its ability to control the re-export of controlled goods produced under licence to countries or regimes to which the UK would not sell directly, as well as the threat of reverse engineering and other downstream production risks. Each new producer can become a proliferator, and where production agreements are in countries with weaker export control regimes than the UK, the risk is that these capacities could then spread exponentially. States to which the UK will not directly sell arms to have more and more alternative sources from which to choose.
While these are challenging and complicated areas, nevertheless if the purpose of the transfer control system is to prevent the supply of arms where there is a risk they will be misused, it is incumbent on the control system to attempt to meet these challenges and to complement the Government’s counter proliferation aims, and its broader support for international human rights. The current regulations on licensing intangible transfers and physical exports (which cover many types of production equipment) do not address the particular characteristics of licensed production (i.e. how to apply controls on the equipment produced under licence, not just the transfer of technology by intangible means). While, maintaining control over licensed production is clearly more difficult than controlling direct sales, if the Government feels it right to exert full control over direct exports, it should do the same with licensed production overseas (LPO).
The examples in Q83 clearly demonstrate the particular challenges thrown up by the globalisation of arms production.
Controls need to be applied to the licensed production agreement itself to ensure that British companies wanting to licence the production of weapons overseas should first have to apply to the UK Government for a licence. In particular, licensed production agreements should:
• contain specific re-export clauses to prevent the export of goods produced under licence to countries of concern. If the production company then wished to export to a destination not specified in the original licensed production deal, it would have to seek prior approval from the UK Government; • contain specific clauses relating to the duration of the agreement and what happens when the agreement reaches the end of the agreed time period; and • place clear and binding contractual obligations on production ceilings. With any production or export over and above terms specified in the original licensed production agreement requiring an additional licence from the UK.
21
When licensing LPO contracts, the Government should take into account:
• whether an export licence would be refused for a direct export of the proposed production system; • whether the recipient state can demonstrate sufficient accountability in terms of export and end-use control; • whether the end-user has a record of violating UN and other international arms embargoes; or • whether there is a concern that the recipient government may licence the export of the resulting equipment to countries to which the UK Government would not licence such an export directly.
While UK companies would be required to obtain specific end-use undertakings from the overseas producer or to insert a clause in their contracts providing for restrictions on re- export, the UKWG does not envisage the Government pursuing the UK licensor in the event that the terms of the licensed production agreement are broken by the licensee (unless of course there is criminal negligence or culpability), nor is it likely that the parties in the recipient country would be pursued through the UK court system.
But by licensing the LPO, and thereby setting out clearly the obligations that flow from such an arrangement, it would be a straightforward matter for the Government to know when to apply sanctions to licensees who do not honour their contract, and/or the states within where they are operating.
This sanction could take the form of revoking the licensing agreement and refusing to provide any subsequent parts, training, advice etc related to the agreement. Furthermore, the Government should refuse to licence any additional LPO or direct exports until such time as it is satisfied that the recipient state will ensure that all future contractual obligations will be honoured. One possibility would be for the Government to have the power to ‘blacklist’ any foreign company which breaches the terms of a licence production agreement, so that no UK company could then deal with that foreign company.
Opponents to these proposals have argued that putting in place stricter controls would damage the competitiveness of the UK defence industry as other governments do not place such controls upon their producers. However there are examples of governments that have successfully placed controls on LPO agreements without damaging national industry. As mentioned in the consultation document, this approach is already employed by a number of EU Member States, including Sweden and Germany. Furthermore, the US imposes and enforces controls on LPO, and Russia has begun to introduce stringent post-production controls on goods produced under licence. 46 In 2005, the US accounted for just almost 46 percent, and Russia 11 percent, of all arms deliveries worldwide.47 This suggests that controls on LPO need not damage the competitiveness of the defence industry. While the US does have a special global position allowing it to enforce these types of agreements, and therefore where the UK on its own may find it difficult to enforce controls, working with the US and other partners would create more of a chance of success and build up a cumulative effect where there are more and more cases of licensees complying with LPO agreements. The UK should look towards promoting these initiatives at the wider EU level to ensure greater compliance.
The Government has argued that the system in the US does not work, however there is at least the possibility of legal action. It does not make sense to assume that a lack of controls
46 For example, in May 2005, Venezuelan officials announced the signing of a US$54 million deal for 100,000 Izhmash-produced AK-103 assault rifles, along with ammunition and other unspecified light weaponry with Venezuelan company Cavim. One of the conditions of the contract stipulates that Venezuela will not be able to export these weapons without Russia’s consent. See Venezuela formalizes Russian arms deal , ISN Security Watch (20 May 2005)
22 would do anything but facilitate a much greater level of ‘diversion’.
Furthermore, the added burden of UK exporters needing to assure itself of the bona fides of the overseas operation before entering into a new agreement should not be a factor that would affect competitiveness. As part of their current compliance procedures, and even as part of corporate social responsibility, UK exporters should already be considering such issues, with regard to their commercial competitiveness, the legitimacy of their operations, and in relation to their corporate social responsibility commitments.
The UKWG recommends that amendments are made to the primary legislation to grant Government the power to allow licensed production deals per se to be subject to scrutiny and licensing approval. The Government would then be able, through the introduction of the appropriate secondary legislation, to regulate LPO in the manner already discussed.
Therefore, the UKWG recommends that the following amendments be made to section 9 of the ECA:
• The Secretary of State may by order make provision for or in connection with the imposition of controls regulating the licensed production of controlled goods overseas. • In this section ‘licensed production’ means production under commercial licence from a UK person, UK company or company based in the UK of that entity’s propriety controlled goods or technology. • An order under this section may make provision in connection with any controls that may be imposed be a directly applicable Community provision on licensed production agreements. • Controls shall be imposed under this section on acts done outside the UK, but only if they are done by a person who is, or who is acting under the control of, a UK person, UK company, or company based in the UK.
However, if the review decides not to revisit the primary legislation, then at a minimum, the Secretary of State should issue new guidance to provide that the contract (to set up the LPO) must be presented to the Government as a condition of the licence. A licence would subsequently only then be issued if certain safeguards and agreements as outlined above were included in the terms of the contract.
Overseas subsidiaries
The issue of foreign subsidiary companies presents a challenge for the UK export control system, not least because subsidiaries are separate legal entities from their UK parents and therefore are regulated under the jurisdiction of the state in which they are located. In the case of overseas-based, UK-owned subsidiaries, it appears that UK controls do not apply at all – even to embargoed destinations. This is despite the fact that they may be owned, or controlled, by a UK-based company.
It is clear that overseas subsidiary companies have and are likely to continue to supply military equipment to a variety of destinations in cases where the UK parent company would not receive an export licence to export similar equipment directly from the UK.
The UKWG recommends that the Government should use this review to establish ways of regulating exports from subsidiary companies. While clearly a complex legal area, at the very minimum the UK should be able to apply UK regulations on parent companies where it can be proved that the parent company holds de facto control over the subsidiary.
The UKWG recommends that to enable this, the Government make use of certain language already set out in the ECA. Under Section 2(2) (b) and Section 3(7), the ECA currently confers certain powers on the UK Government to impose export controls on the transfer of
48 Section 11, Export Control Act 2002.
23 technology or technical assistance if it is “by a person or from a place outside the United Kingdom to a person, or a place which, is also outside the United Kingdom (but only where the transfer is by, or within the control of, a United Kingdom person) ” (emphasis added). In this instance “United Kingdom person” means “a United Kingdom national… or a body incorporated under the law of any part of the United Kingdom”.48 This also applies to the trade controls in section 4(8) of the ECA which states that “trade controls may be imposed on acts done outside the United Kingdom and the Isle of Man, but only if they are done by a person who is, or is acting under the control of, a United Kingdom person ” (emphasis added).
Therefore, if a UK person or a body incorporated in the UK has control over a transfer of technology, technical assistance or trade from one third country to another third country (which encapsulates the concept of overseas subsidiaries trading with other third countries) they will fall under the control of the ECA. By utilising the language already set-out in the ECA, the UK Government could then bring the UK parent company of foreign subsidiaries into the licensing regime and subsequently impose conditions upon them.
The relevant level of control that a UK parent company has over their subsidiary would be a question of fact, and evidence could be formed from inter alia from an examination of whether the parent company:
• owned a controlling share of the subsidiary; • is acting on behalf of the subsidiary; • appointed the directors of the subsidiary; • is involved in negotiations for the subsidiary; • drafts contracts for the subsidiary; • had ultimate decision-making control over the subsidiary; and • has a hand in the day-to-day running of the subsidiary.
In essence the nature of the whole relationship would need to be examined to evaluate who in effect is running the subsidiary. Common directorships and shareholders could also be an important factor, as could any arrangements in place to share profits or losses (for instance, are there any inter-company loans, bank accounts etc).
Therefore, in order to give effect to the powers already conferred in the ECA, guidance should be issued by the Secretary of State to outline how a UK parent company may come under the regulations of the ECA where a subsidiary is in effect acting under the control of that parent company. Guidance should set out the general principles to be considered when evaluating whether the parent company has de facto control over the subsidiary, and should include, but not be limited to, those factors listed above.
The UKWG further recommends that amendments are made to the ECA to state that “where the transfer is by, or in cooperation, with a United Kingdom person”, or “ acting in conjunction with ” to create an additional obligation on UK persons and companies who act in cooperation or in conjunction with overseas subsidiaries even if they themselves have no direct control over it.
The Military End Use Control
For all readers:
Q88 Please provide any evidence you have that significant items of equipment have been supplied from the UK for the use of the military in embargoed destinations or other destinations of concern.
24 In January 2006, a US Predator unmanned aerial vehicle (UAV) reportedly fired a Hellfire missile seven kilometres across the Afghan border into Pakistan. Eighteen local villagers, alongside four suspected al-Qaeda members were killed. 49 The Pakistan Government protested to the US over the violation of its territory, and the deaths of civilians. A similar Predator attack in 2002 killed six men reported to be al-Qaeda members in Yemen. Amnesty International concluded that, because “the US authorities deliberately decided to kill, rather than attempt to arrest these men, their killing would amount to extra-judicial executions.” 50 The Predator is manufactured in the US by General Atomics Aeronautical Systems, but contains key electronic computer systems manufactured by UK-based Radstone Technology. Radstone’s Managing Director, Charles Peterson, has said, “the Predator wouldn’t fly without Radstone technology.” 51 However, it appears that BERR has determined that the ‘electronic’ brain of the Predator UAV is not a licensable product (so not subject to export controls), despite the fact that the end product (a weapons-capable UAV with a range in excess of 300km) is subject to some of the most restrictive controls under the ECA.
A similar problem involves Turkish made Land Rover Defender 110 military vehicles. The Land Rovers were produced from goods for which no UK licence was required (when they left the UK for further processing overseas), but which would have required a licence if exported from the UK in the form in which they subsequently left the overseas production facility. Seventy percent of the components were exported from the UK in kit form from Land Rover for Turkish assembly into military vehicles. As the components were not specifically adapted military components, they were classified as NLR items, notwithstanding the fact that they are clearly sold as military vehicle kits, but without licensable content. They were subsequently gifted from the Turkish Government to the Uzbek Government, and were consequently used by Uzbek troops during the Andijan massacre in May 2005. While the UK does not have the power to control the export of civilian specification Land Rovers, alarms bells should have been ringing that there was a real risk that such military vehicle flat-pack Land Rovers could be modified into a military vehicle and ended up being used by a Government with a questionable human rights record.
Q89 Do you consider that the scope and coverage of the Military End Use Control should:
Extend to cover non-controlled components and any significant non-controlled complete item where the exporter knew, or had been informed by the Government, that the item was for use by the military in an embargoed destination or other destination of concern?
Q90 Please provide reasoning and evidence in support of your choice above.
Where the UK Government has determined that the UK should never be involved in supplying equipment in support of specified activities, it should use end-use catch-all controls to avoid loopholes whereby items not included on control lists are beyond regulatory reach. While a system of controlling goods contained within specific military and dual-use lists is the cornerstone of most export control systems, the ultimate purpose of export controls is to prevent certain types of activity or consequences. The challenges posed by technological advancement, the development of new products and the adaptability of certain dual-use goods and technologies all pose problems for a system that operates purely on the basis of only that which is listed is controlled.
Given the trend toward globalisation and the increasing importance of dual-use and civilian
49 Pakistan rally against US strike , BBC News (15 January 2006),
25 off-the-shelf (COTS) goods in the development of modern weapons systems, there is a clear risk that more and more goods critical to the operation of these systems will bypass the licensing system as they do not fall within the definitions or specification of the control lists.
EU Dual-Use Regulation 1334/2000 includes a military end-use catch-all clause, to be applied where the purchasing country or country of destination is subject to an arms embargo.52 However, the current catch-all clause does not apply to transfers of unlisted dual-use goods where the destination is not embargoed, This, as demonstrated by the case of NLR Land Rover components to Turkey (see Q88), undermines the current transfer control regime. Furthermore, regulating only military transfers does not capture the use of police and security equipment to, for example, torture and abuse human rights. One way to address these problems is to expand the concept of an end-use catch-all clause to include goods and technologies with a Military, Security or Police (MSP) end-use.
Any such system must be able to differentiate between ‘critical’ components and mundane goods like nuts and washers, wiper blades and fan belts. This is not without its complicati ons. However, the UK Government should consider developing either threshold systems (as happens in the US) or significance criteria for the role of components in the finished item.
A 'significance' or 'criticality' criterion would involve introducing a licensing requirement for items which are critical or significant components in a piece of controlled MSP equipment. In practical terms, this 'significance' criterion could be composed of a number of thresholds, any one of which would trigger a licensing requirement (for example, percentage of total item by value/weight/volume; a 'criticality' assessment; non-replaceability of part etc.)
The USA's trade controls contain a number of such threshold criteria, particularly in relation to extra-territorial trade controls. 53 For example, the licence-ability of foreign defence exports containing US-origin components is partly assessed by the value of the complete equipment (requiring a licence if the re-exported equipment is being sold for over £14m for ‘major defence equipment’ or £50m for ‘other defence equipment’). 54 Likewise a number of US trade embargoes are applied to goods containing more than a specified percentage (by value) of US-produced content. 55
Germany has developed the ‘Einzeleingriff’ 56 or ‘single action’ catch-all clause, whereby the transfer of an unlisted item can in principle be refused if German security, peaceful coexistence of peoples in the world or German foreign relations is seriously threatened.57 The Einzeleingriff has been applied to non-listed communication equipment to a country under UN arms embargo, where it was believed the equipment would be used for internal repression. As the equipment had no military end-use (ie no use in the development of or incorporation into weapons) the catch-all clause under the Dual-Use Regulation did not apply.58 The German authorities see Einzeleingriff as proving useful in, for example, preventing non-listed goods from being diverted for a terrorist end-use. This approach has considerable advantage as it does not establish an obligatory licensing requirement for industry, while at the same time it allows the authorities to prevent suspicious transfers in specific cases.
52 Article 4(2), Council Regulation (EC) No. 1334/2000 (20 June 2000). 53 The UKWG is not proposing that the UK replicates this degree of extraterritorial control over UK-produced components, but simply cites these as examples of existing controls on components or technical content based upon the significance of that content. 54 US International Traffic in Arms Regulations § 123.9. 55 For example, the re-export to Sudan of controlled goods containing US-produced content is only permitted if the US content is under 20 percent by value of the goods. US Department of Commerce, Export Administration Regulations §742.10. 56 See §2(2) of the Regulation Außenwirtschaftsverordnung (AWG) Foreign Trade and Payments Law (18 December 1986). 57 §7 AWG Foreign Trade and Payments Law (18 December 1986). 58 Michael Witter, Challenges: Brokering, Catch-All, ITT, End-Use, Presentation at the Seventh Annual International Export Control Conference, Stockholm, Sweden (20-22 September 2005). 59 Royal Decree on foreign arms trade, article N - Attachment, 2nd category, department 1, A. 19. 60 Castryck Geert, Sara Depauw and Nils Duquet, Profile of the foreign trade in military material and the defence-related industry in Flanders , Brussels, Flemish Peace Institute (2006).
26 In Belgium, a military end-use catch-all clause has been included in the transfer controls regime of the Flanders region. This catch-all clause provides a licensing requirement for the export or transit of equipment intended to support military actions. 59 This requirement includes related components, software, technology, machinery etc. The Belgian regulation does not specify what is meant by military actions, or how broadly other equipment and other materials are to be interpreted, however the control has been used fairly regularly, and comprises approximately 60 percent of both the number and value of export licences for military material granted by the Flemish Government. 60 One such case includes the integration of visualisation screens, which are non-controlled items, to be exported for integration into controlled items such as fighter jets and military vehicles. Other types of goods which require a licence under the catch-all include airport lighting systems, software and other non- licensable components for vehicles, planes or ships.
The UKWG does not envisage that a MSP end-use catch-all will create an undue burden on the defence industry or Government. It is not the intention of the UKWG that all non-listed items being transferred to an MSP end-user should be caught by the catch-all clause, but only those items whose final end-use will be for an MSP purpose. It would not be the responsibility of exporters to check with the Government each and every time they export a civilian item to an MSP end-user, but only when informed by Government that the non-listed item is or is likely to be used for an MSP end-use or when they (the exporter) knows or suspects this to be the case. Applying a due diligence test, in cases such as Radstone exporting uncontrolled civilian technology for incorporation into Predator UAVs or Land Rover exporting vehicle components for use by Turkish security forces, those companies would be expected to alert the Government and then to enter the export licence application process. The administrative burden would be restricted to only those cases when the Government or the exporter is aware of a suspicious sensitive transfer in a specific case.
The UKWG recommends that amendments are made to the Control Orders to implement an MSP end-use catch-all clause, whereby an exporter would require a licence if:
(a) the exporter has been informed by a competent authority that such goods are or may be intended, in their entirety or in part, used for a military, security or police end- use; or (b) where the exporter has knowledge, or grounds for suspecting that, such goods are or may be intended, in their entirety or in part, to be used for a military, security or police end-use, unless the exporter has made all reasonable enquiries as to their proposed use and is satisfied that they will not be so used.
While implementation of the catch-all provisions may not be straightforward, it is clear that mechanisms are already required to enforce controls on the current categories already in place (chemical, biological or nuclear weapons programmes and military end-use to embargoed destinations).
Pre-licensing registration system for traders
For all readers:
Q95 Should traders be required to register in order to be eligible to apply for a licence to conduct specific transactions?
Yes
Four options have been identified in this area. Please indicate which of the four options you favour, with supporting arguments and evidence in the larger boxes below:
27
Introduce a pre-licensing registration system for traders and publish the information, possibly linked to a test of basic awareness of the controls (option added)
Article 4 of the EU Common Position on arms brokering encourages member states to have a system of registration in addition to case-by-case licensing of individual transactions. The UKWG also sees the registration of brokers as a valuable additional tool in the battle against irresponsible arms traders. The creation of a register has an overriding public interest in regulating irresponsible arms traders who facilitate UK arms to reach regions of conflict, contrary to stated UK arms policy, and to fall into the hands of unscrupulous end-users.
The Government has argued that the introduction of a registration system would create additional and unwelcome levels of complexity to the current system, and unnecessarily increase bureaucracy for both the defence industry and Government. This is inconsistent with its general approach to registration in other fields, for example registration is required inter alia in the financial services, the medical profession, the legal profession, and for childminders and bouncers. It is evident that in these areas the bureaucracy for implementing a registration system does not create an undue burden on the defence industry Government.
Administration costs need not increase substantially. In the US, a register comprising 5500 manufacturers, exporters and brokers is managed by just 2 civil servants and 4 administrators. 61 The size of a UK register would be significantly smaller—in 2005, 86 SITCL and 39 OITCL were applied for 62 —and in any event could be self-funding through the charging of registration fees.
There are many additional benefits to be gained by the introduction of a formalised registration system for those engaged in licensable trade activities . In particular, by including education and a test of basic awareness of the controls as a condition of registration, it could create a better understanding of the obligations under which traders must act and help foster a culture of compliance. This would enhance existing controls by providing a useful entry point for ensuring all traders have a good knowledge of the law and, related to this, would assist in dissemination of information regarding changes to control lists, open licences, embargoed destinations etc and awareness-raising, especially for those brokers based outside of the UK.
An additional benefit would be to simplify prosecutions. Knowledge is an essential prerequisite to establishing criminal intent under Section 9(2) & (3) of the Trade Control Order, in particular, that “any person knowingly concerned in the supply, delivery, transfer, acquisition or disposal of any restricted or controlled goods with intent to evade any prohibition or restriction in section 3(1) or 4 shall be guilty of an offence.” (emphasis added) A formal registration system linked to education and testing on the obligations under the Act would be useful in helping to prove knowledge. Similarly, an acknowledgement of knowledge and expertise by those registered would be one of the evidentiary building-blocks in terms of proving intent.
The ability to refuse entry to or to strike off from the register would have a deterrent effect on traders as it would effectively restrict their abilities to continue their business. This would also be useful in terms of alerting other governments with whom the UK is willing to exchange such information to the identity of potentially problematic brokers. The UKWG also recommends that those traders who had been struck off the register have their names published. This would alert other traders, manufacturers, transporters, freight-forwarders and the financial and insurance industries that they should be extremely cautious in their dealings with those who have been struck off the register.
61 Telephone discussion with David Trimble, Director of Defense Trade Controls Compliance, US State Department (8 May 2007). 62 UK Strategic Export Controls Annual Report 2005.
28 A registration system would provide Government with an established institutional memory on the actions and patterns of behaviour of all registered traders. Registered traders would be required to identify their key officers, providing Government with an opportunity to run checks (eg criminal record checks) on those wishing to trade. Subsidiaries, foreign owners and any other persons connected with the company could also be identified, which may help the Government to flush out possible front companies. Registered companies would also be required to provide the Government with any changes or updates to the company structure such as changes to the Board of Directors, new shareholders, possible mergers and acquisitions. This would enable Government to flag traders who may alter their pattern of behaviour, and allow pre-emptive compliance checks before questionable trades are completed. It would also enable Government to identify new traders with whom the Government has not previously dealt, and also those over whom the Government has concerns.
A formalised registration system would assist information sharing by providing customs and other enforcement and overseas agencies with an up-to-date and instantaneous resource to confirm registered (and therefore licit) traders. Information could be shared within the EU and other friendly states, and would enable quicker dissemination of data on unregistered traders as well as confirming compliance with other foreign export control regimes.
The UKWG therefore recommends that the Trade in Goods Control Order be amended to include the following new section on registration for traders:
all persons engaged in trade under the provisions of this Order, or any other Trade in Controlled Goods Order (such as the Embargoed Destinations Order), shall register, and that no person may engage in the trade in controlled goods without a licence issued in accordance with the ECA.
New regulations would be needed regarding registration criteria and exemptions; identification of the purposes for which information held in connection with anything done under or by virtue of the Order could be used; identification of those persons to whom any such information could be disclosed; and explication of the grounds for striking brokers from or refusing applicants entry to the register, including any appeal procedures.
Torture Equipment
For all readers
Q97 Do you think that controls on torture equipment should be altered by:
Adding extra items to the list of torture equipment (either by extending the coverage of the EU Regulation or by introducing unilateral UK controls on items not currently listed in the EU Regulation);
Introducing an end use control on equipment that could be used for torture or other cruel, inhumane or degrading treatment;
Q98 Do you have evidence of UK involvement in supplies of torture equipment?
Yes
29 If so, please provide details below.
On 11 September 2007 UK firm Cardiff-based BCB International Ltd and Chinese firm Famous Glory Holdings were found by journalists to be promoting leg-cuffs in their promotional material at the DSEi defence exhibition. BCB International was also advertising a taser electric dart device. 63 Although the specifications of the BCB leg-cuffs suggested that they fell outside the (2006 revised) version of the PL5001(c) category definition by exceeding 280mm in length, this reflects a deficiency in the redraft of the category definition. This case demonstrates commercial activities clearly counter to the spirit of the Government’s policy not to permit the export or trading of leg-irons and shackles.
The ease with which UK-based traders might obtain such equipment was illustrated in 2006 when a group of school children participating in a TV documentary imported torture equipment to highlight the loopholes in the export control regulations.64 The school children were able to import torture equipment including: thumb cuffs, which have been used in China against Tibetan monks; wall-cuff restraint devices, used for shackling a prisoner to a wall; and a Chinese ‘sting stick’, a metal bar covered with spikes which would be illegal to carry in public in the UK. The use of similar equipment for torture and ill-treatment has been reported in China and Nepal. 65
Q99 Which of the above options do you consider would be more effective in dealing with the problems, and why (please provide examples or evidence).
Option 2 - Introducing an end use control on equipment that could be used for torture or other cruel, inhumane or degrading treatment
Most stakeholders appear to see the value in extending catch-all controls to items which will be used in torture, degrading treatment or executions. The purpose of such a clause would be to state that if the exporter were aware, or ought to be aware, that the intended use of items is to facilitate such prohibited acts, irrespective of whether the item were on a control list, the transfer would be prohibited without the express permission of the Government in the form of an export licence. Such a catch-all would clearly be in line with the UK’s support for international human rights and the strong lead that the Government has already taken with regard to the transfer of equipment for use in torture.
The Government already has considerable powers under the ECA to impose export controls on certain categories of goods. Currently, pursuant to Section 5(4) and Sections 2(1) and 3 of the ECA, goods in relation to which the Government may impose export controls already include goods, the exportation or use of which is capable of leading to the “carrying out anywhere in the world of (or acts which facilitate)…(d) breaches of human rights”. It is arguable that this would enable the Government to impose export conditions on a set of goods that is wider that the set contemplated by either of the relevant EU regulations if it considers that such goods are capable of leading to breaches, or the facilitation of breaches, of human rights. Therefore, the UK Government should make use of the powers already conferred upon it to implement stringent controls to prevent the transfer of potential instruments of torture that could breach human rights.
The UKWG recommends that the Government amend Section 4 (export of dual-use goods and end-use control) of the Export of Goods, Transfer of Technology and Provision of Technical Assistance Control Order 2003, to provide that dual-use goods not listed in Annex I
63 Leg iron row sees company thrown out of arms fair , The Guardian (12 September 2007); China ‘shackle’ merchant earns slap on wrist at DSEi defence show , Daily Telegraph (12 September 2007). 64 Dispatches: After School Arms Club , Channel 4 (broadcast April 2006). 65 European Union: Stopping the Trade in Tools of Torture , Amnesty International, POL 34/001/2007 (27 February 2007).
30 of the Regulation should be subject to the provisions of the Control Order, where –
• the exporter has been informed by a competent authority that such goods are or may be intended, in their entirety or in part, to be used in torture, degrading treatment or executions; or • the exporter is aware that such goods are intended, in their entirety or in part, to be used in torture, degrading treatment or executions; or • the exporter has grounds for suspecting that such goods are or may be intended, in their entirety or in part, to be used in torture, degrading treatment or executions.
At a minimum, if the Government decides not to amend the regulations to include a torture end-use catch-all, then extra items should be added to the list of torture equipment, either by extending the coverage of the EU Regulation or by introducing unilateral UK controls on items not currently listed in the EU Regulation.
In this case, the UKWG would recommend adding spiked batons and equipment designed to execute human beings as Restricted Goods under the Trade in Goods (Control) Order 2003. It is difficult to see how such equipment could meet legitimate law enforcement standards such as the UN Code of Conduct for Law Enforcement Officials.
The UKWG would also recommend adding various items as either Controlled Goods under the Trade in Goods (Control) Order 2003, or as Partially Restricted Goods under the new proposed category:
• Handcuffs . Handcuffs are not currently included in the UK’s ‘Military List’ nor the dual- use control lists. This is at variance with other national export control regimes, including that of the US.66 Member organisations of the UKWG have documented a number of instances of torture and ill-treatment involving handcuffs used as restraints and as ill-treatment devices. 67 Although it is not expected that authorisations to export handcuffs would be denied in many cases, the UK might reasonably wish to deny exports of policing equipment like handcuffs to destinations actually embargoed on human rights grounds, such as Zimbabwe. At present this would be impossible, since they are not controlled for export, nor caught by the catch-all clause for embargoed destinations in the EU Dual-Use Regulation 1334/2000, since they are not intended for military use; • Sjamboks and whips . While they may have legitimate law-enforcement uses as impact instruments, sjamboks have been documented being used for ill-treatment in a number of countries, including Namibia and Zambia. 68 The UKWG is aware of at least one UK supplier of sjamboks;69 and • Equipment and technology designed for interrogation. In the absence of a torture catch-all clause, controls should be placed on trading in equipment and technology evidently designed for interrogation. This would include not only legitimate interrogation technologies which could be misused, but also equipment evidently intended for ill-treatment. For example, in December 2004, a Bangladesh newspaper reported that: “[r]eliable sources said the home ministry has also floated a tender to purchase various interrogation equipment like interrogation foot heaters (digitally controlled), interrogation hangers, interrogation chairs, interrogation face lights…voice recorders, and interrogation audio/video hidden evidence monitors.” 70 While the UKWG cannot verify the facts of this report, this list largely matches a request which the UKWG is aware was posted on a tender website in October 2004
66 US Commerce Control List, Supplement No. 1 to Part 774, Section 0A982. 67 For example: Equatorial Guinea: A trial with too many flaws, Amnesty International, AFR 24/005/2005 (07 June 2005); Russian Federation: Continuing torture and rape in Chechnya , Amnesty International, EUR 46/036/2000 (08 June 2000). 68 Policing to protect human rights: A survey of police practice in countries of the Southern African Development Community, Amnesty International, AFR 03/004/2002 (09 July 2002). 69 Extreme Outdoor Gear (Abergavenny, Wales). See website:
31 by a Bangladesh import/export agent, specifying amongst other equipment “Interrogation Foot Heaters” capable of reaching temperatures up to 200 degrees Celsius. 71
It should be noted that the facilitation of torture or other forms of cruel or degrading treatment are not included in the table of Relevant Consequences of the ECA. It is clear that such acts do fall within the definitions of internal repression and human rights violations, but it would seem sensible at this juncture to update the Schedule to specifically include acts of torture under the Relevant Consequences of the ECA in line with existing UK Government and EU policy in this area.
Q100 If you favour change to the controls, do you think this should be at UK or EU level?
UK EU
If yes, please provide reasoning to support your view.
At a minimum changes should be made at the UK level, however the UK Government should negotiate to make changes at the EU level in the interests of regulatory and competitive parity.
Transit and Transhipment
For all readers
Q106 Do you think that the current controls on transit/transhipment, as set out at Section 2.7, should be changed in any way?
Yes
The current regulations on transit and transhipment for controlled goods lack clarity and enforceability. The UK is a major transportation hub, and therefore it is essential that all those involved in transit and transhipment through the UK understand and can easily comply with the licensing system.
In the first instance, the use of the terms ‘transit’ and ‘transhipment’ is confusing. The Export of Goods, Transfer of Technology and Provision of Technical Assistance Control Order makes no distinction between the two terms even though they describe quite different procedures. For example, the Control Order defines transit or transhipment as “transit through the UK or transhipment with a view to re-exportation of the goods in question or transhipment of those goods for use as stores” (emphasis added). However, standard international definitions of transit and transhipment delineate two distinct procedures. Transit does not require a customs procedure as the goods in question do not enter the official territory of the transiting state. Transhipment on the other hand is where a customs entry is made and the goods enter the official territory of the state for a limited period of time before departing from the same or another point of exit. The current definitions are therefore confusing, and should be changed.
While the transit/transhipment regulations are in place to facilitate legitimate trade by allowing goods to pass through the UK, the UKWG is concerned that the current regulations may
32 contain loopholes that permit illegitimate trade. The Export of Goods, Transfer of Technology and Provision of Technical Assistance Control Order allows controlled goods to transit through the UK without a licence as long as certain conditions are met. There are some limitations to this: the transit regulation does not apply to a range of sensitive goods (which includes landmines, torture and paramilitary equipment, or to any goods destined for use in a WMD programme) or to certain sensitive destinations (which includes all embargoed states and Iran, Iraq, Libya and North Korea). 72 In practice this means that all other controlled goods, including SALW, can transit through the UK without a licence to any destination not caught under the limitations, so long as the conditions in the Control Order are met. These conditions are that:
a. the goods do not remain in the UK for longer than 30 days, and that they remain on board a vessel or aircraft, or be on a through bill of lading or through air waybill; b. the destination of the goods has been determined in the original exporting country and has not been changed prior to their exportation from the UK; and c. the goods in question were exported from the source country in accordance with their laws relating to the exportation of goods.
However, under the Control Order, aside from providing an air waybill or bill of lading, the freight forwarder is required to provide no further documentation in order to transit through the UK. This means that in practice HMRC is powerless to confirm that the goods in question have been exported in accordance with the laws of the original exporting country, or that the final destination has not been changed. While the Regulations do put in place some limitations on transit, those limitations are effectively unenforceable.
Furthermore, air waybills are not standardised or regulated. They are raised by the freight forwarding company and can provide as much or as little information as they decide, including with regard to how equipment is described. As there are no regulations on the quality of information provided on an air waybill, there is little obligation to freight forwarders to be transparent. Therefore, even if HMRC did want to fully enforce the transit regulations, aside from prior intelligence or doing spot checks, it would be a convoluted task to verify the accuracy of an air waybill.
The UKWG recommends that the Control Order is amended. Freight forwarders who transit controlled goods through the UK should submit to HMRC, prior to transit:
• a written confirmation of the route and destination of the goods to be transited; • a copy of the authorised licence from the original exporting state; • a copy of the documentation provided from the ultimate destination such as an end- use certificate or international import certificate; and • a declaration of the type equipment being transferred.
This would provide HMRC with prior notification of any controlled goods being transited through the UK and their final destination.
In addition to requiring more information to be provided as a matter of course, there may also be circumstances whereby a transit licence should be required. Under the current control system, so long as the limitations identified in section 11, paragraph 11 of the Control Order are not triggered, goods can be transited through the UK without the need for a licence. Therefore, it is currently legitimate to transit sensitive goods such as small arms, cluster munitions or MANPADS through the UK to non-embargoed countries of concern eg Ethiopia and Eritrea, provided that the exporter has complied with the laws of the originating country. This undermines the transfer control regime as well as the UK Government’s counter proliferation aims and its broader support for international human rights. In essence the UK, through its position as a key transportation hub, can facilitate the transfer of some very questionable arms transfers to countries of concern.
72 See Section 11, Paragraph 11, Export of Goods, Transfer of Technology and Provision of Technical Assistance (Control) Order 2002.
33 The UKWG is sensitive to the fact that licensing all transit of controlled goods through the UK would involve an additional administrative burden on the licensing authorities and industry. Nevertheless, legislation should provide the Government with the power to restrict or refuse transits through the UK of certain sensitive equipment to undesirable destinations. The types of equipment and destinations should, at a minimum, run parallel to those identified in Schedule 1 and Schedule 2 of the Open General Transhipment Licence (OGTL). This would not create a blanket licensing requirement. If the transit involved moving goods in Schedule 1 to any destination, or any other controlled goods to a destination specified in Schedule 2, then a (newly created) transit licence would be required.
It should however be noted that the UKWG has some concerns regarding the existing OGTL. Of particular concern is the fact that the lists of goods in Schedule 1 and destinations in Schedule 2 are not subject to frequent enough review to ensure that goods are not being transhipped to sensitive destinations. For example, under the OGTL it would be perfectly legitimate for an exporter to tranship combat aircraft (ML10), such as helicopters, to Chad. While there is no embargo on Chad, recent evidence suggests that Eastern Chad is becoming drawn into the conflict in Darfur, and as such there is a significant risk that military helicopters could be involved in the conflict. Given that the use of attack helicopters in Darfur has been documented in recent reports by a UN Panel of Experts on Sudan 73 and by Amnesty International 74 , the value in requiring transhipment licences in such cases should be clear. The regulations should therefore be amended so that the Schedule 1 (Goods concerned) and Schedule 2 (Destinations concerned) are regularly reviewed and updated to take into account changing situations in-country. Alternatively, a restrictive ‘white list’ of destinations, whereby there is a presumption of approval, such as those countries listed in Group 2 of the Open General Trade Control List 75 , could be introduced. Under such a system, transhipments (or transits) to any other destination would be licensable.
In addition, with regards to the OGTL, there are implications for transparency and accountability. For those UK persons or companies (typically a freight forwarding agent) who make use of the OGTL, there is no formalised method of recording who uses it or what is transhipped, which makes it impossible for Government to understand or report on how often the OGTL is used and in what context. This means it is impossible to assess whether the transhipment regulations are being applied with in accordance with UK transfer control policy.
The UKWG recommends that the Government:
• amend the definition of transit and transhipment in the Export of Goods, Transfer of Technology and Provision of Technical Assistance Control Order so that the Control Order (and any subsequent regulations) recognise standard international definitions of the two different procedures; • amend the Control Order to require more information to be provided to HMRC prior to transit through the UK (as detailed above); • periodically review the limitations applied to transits under section 11, paragraph 11 of the Control Order to ensure the lists of sensitive goods and undesirable destinations remain relevant; • amend the Schedules within the OGTL to implement a regular review process to take into account changes to situations in-country, or produce an effective white list of countries whereby there is a presumption of approval so long as the conditions are met; and • clarify recording obligations for transhipment made under the OGTL and formalise a method for monitoring and recording it’s the use.
73 United Nations Report of the Panel of Experts established pursuant to resolution 1591 (2005) concerning Sudan prepared in accordance with paragraph 2 of resolution 1665 (2006), S/2006/65, 30 January 2006, S/2006/250: 19 April 2006 and S/2006/795 (October 2006). 74 Sudan: arms continuing to fuel serious human rights violations in Darfur , Amnesty International, AFR 54/019/2007 (08 May 2007). 75 Australia, Austria, Belgium, Canada, Channel Islands, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden and the USA.
34
Trade Controls: receipt of a fee or commission
For all readers
Q111 Would you support the extension of controls to cover any ‘act calculated’ to promote the arrangement or negotiation of a contract to move “Controlled Goods” between third countries, regardless of whether a fee, commission or other consideration had been received?
Yes
Please provide evidence to support your view where possible.
Persons may well promote the arrangement or negotiation of a contract for the acquisition or disposal of controlled goods, where that person knows or has reason to believe that such a contract will or may result in the removal of those goods from one third country to another third country without doing so for a fee, commission or other consideration. Such transfers may be arranged for political, social or religious reasons, to, for example, rebels groups or those who commit terrorist acts, or those who do so in respect of a possible future financial or commercial advantage.
Therefore, the UKWG recommends that the Control Order is amended to state that, “no person shall in return for a fee, commission or other consideration, including political, social, religious or commercial consideration ” do any act calculated to promote the arrangement or negotiation of a contract to move Controlled Goods between third countries.
Guidance issues
For all readers
Q113 Can you identify any areas of export control that would, in your view, benefit from improved guidance from ECO?
Yes
Please provide details of the area/issue and suggestions for what guidance could be provided and via what medium
The UKWG recommends the following changes to the existing guidance:
• Introduction of guidance referencing the User’s Guide to the EU Code of Conduct. The Users’ Guide is a useful tool for licensing officials across Member States, It includes inter alia resources and methodologies for assessing the criteria of the EU Code; • Introduction of guidance to implement specific controls concerning overseas licensed production. Guidance should state that as a condition of a licence (for either a physical or intangible transfer) the contract setting out the overseas licensed production deal would need to be submitted to BERR as a supporting document in
35 the licence application. The contract would be required to outline certain safeguards and agreements, including, inter alia : - specific re-export clauses to prevent the export of goods produced under licence to countries of concern. If the licensee then wished to export to a destination not specified in the original licensed production deal, it would have to seek prior approval from the UK government; - specific clauses relating to the duration of the agreement and what happens when the agreement reaches the end of the agreed time period; and - clear and binding contractual obligations on production ceilings. Any production or export over and above the terms specified in the original licensed production agreement would require an additional licence from the UK;
• Introduction of guidance to the effect that a UK parent company may be liable under the ECA for the acts of their subsidiaries where the subsidiary is in effect acting under the control of the parent. Factors to take into account when evaluating whether a parent company has de facto control over the subsidiary would include, inter alia , whether the parent company: - owns a controlling share of the subsidiary - is acting on behalf of the subsidiary - appointed the directors of the subsidiary - is involved in negotiations for the subsidiary - drafts contracts for the subsidiary - had ultimate decision-making control over the subsidiary - has a hand in the day-to-day running of the subsidiary
In essence the nature of the whole relationship should be examined to evaluate who in effect is running the subsidiary. Common directorships and shareholders may be an important factor, as may arrangements in place to share profits or losses (for instance, are there any inter-company loans, bank accounts etc); and
• Removal of the guidance on incorporation. On 8 July 2002, the Government announced new Guidance on considering applications for export licences for the supply of military equipment for incorporation into final products for possible onward export. In the same announcement, it was revealed that export licences had already been issued under this Guidance for incorporation of Heads-Up-Display Units into the cockpits of F-16 aircraft in the US, for onward export to Israel. 76 The new Guidance provided criteria which effectively authorised exports of controlled goods that would otherwise have been refused under the Consolidated Criteria had the equipment been exported directly from the UK and not the US, and was therefore contrary to established UK policy on Israel.77
The Government’s decision on incorporation clearly undermines the UK transfer control regime by allowing the UK-US defence relationship to pre-empt the Consolidated Criteria. The new guidance does include the safeguard that the “export control policies and effectiveness of the export control system of the incorporating country” are to be taken into account. However, in the case referred to above, it would seem this safeguard has been ignored. While the US had (and has) an effective export control system, its policy on arms transfers to Israel was clearly markedly different from that of the UK. Furthermore, the UK does not control the export control policies or effectiveness of export control systems in incorporating countries. It seems imprudent then that the UK would be willing to take this into account when making licensing decisions for controlled goods.
76 House of Commons Hansard (8 July 2002) col. 650W. 77 See p. 4 of the Report from the Foreign Affairs, International Development and Trade and Industry Committees Session 2001–02 Strategic Export Controls: Annual Report for 2000, Licensing Policy and Prior Parliamentary Scrutiny Response of the Secretaries of State for Defence, Foreign and Commonwealth Affairs, International Development and Trade and Industry (October 2002), where the government confirmed that no weapons, equipment or components which could be deployed aggressively in the Occupied Territories would, for the time being at least, be licensed for export from the UK to Israel.
36 The guidance on incorporation should be removed or amended. All components for incorporation into complete systems should be assessed on a case-by-case basis under the Consolidated Criteria with the final destination in mind, not the incorporating country.
In addition, the UKWG recommends that the way in which guidance is issued should be reviewed. At the level of the ECA, the UKWG recalls the debates which took place in 2001 and 2002 around the excessive powers of the Secretary of State for Trade and Industry to issue Guidance under section 9 of the ECA. In particular, the UKWG was concerned that Parliament’s role in this process was unduly limited, ie Parliament would merely be informed of changes to Guidance, potentially retrospectively. 78 The Government gave assurances that it would exercise this power with care, and that significant changes to Guidance would not be introduced without due consideration being paid to the concerns of Parliament.
The production of guidance on incorporation shows just how easily the Secretary of State can implement new criteria which changes licence decision-making as and when he or she sees fit, without effective parliamentary oversight, even where that change contradicts established UK policy on export controls, including the Consolidated Criteria. This confirms the fears of those opposed to section 9 of the ECA as currently formulated.
Distinction can be made between guidance which has a significant impact on the way in which export controls are managed, such as guidance which relates to criteria or their interpretation, as compared to minor administrative change. For the former, the UKWG recommends that the Government introduces a new provision in section 9 of the ECA to ensure that the Secretary of State does not have excessive discretion to change the Guidance so as to affect the Consolidated Criteria without advanced oversight by Parliament. In particular, if the Secretary of State is to issue such Guidance, the Secretary of State must do so, subject to negative resolution of Parliament ”. For Guidance representing minor administrative changes, the legislation should stay as currently set out.
CHANGE OPTIONS NOT SPECIFICALLY IDENTIFIED
For all readers
Section 2 covers a wide range of change options, but it cannot be entirely comprehensive. Therefore, the box below provides space for you to put forward and justify any proposal that has not been covered.
1. End-use monitoring
The UKWG recommends that the Government establish a formal system of end-use monitoring which addresses specific measures for monitoring controlled goods after they are exported.
The Government has long maintained that there is no substitute for a rigorous assessment of any proposed export at the time of application, and has argued that “the introduction of a process that allows for the issue of licences based on future end use monitoring militates against the effective application of the criteria at the licensing stage.” 79
78 See section 9(6) of the Export Control Act 2002. 79 Report from the Defence, Foreign Affairs, International Development and Trade and Industry Committees Session 2005-06 Strategic Export Controls: HMG's Annual Report for 2004, Quarterly Reports for 2005, Licensing Policy and Parliamentary Scrutiny Response of the Secretaries of State for Defence, Foreign and Commonwealth Affairs, International Development and Trade and Industry (October 2006), paragraph 40,
37 The UKWG strenuously disagrees with this assertion. The UKWG fully appreciates that these are sometimes complicated judgements, and therefore welcomes the Government’s commitment to thorough pre-licensing assessments. Nevertheless, there is always some risk that equipment or technology exported will be misused or diverted, even when it stays in UK hands (eg there have been recent reports of UK soldiers smuggling guns out of Iraq to be sold in the UK 80 ).
The last few years have witnessed a number of incidents where arms of UK origin have been diverted for purposes or to destinations contrary to the Government’s intentions, and subsequent to its rigorous pre-licensing processes.
Indonesia provides a powerful example of the inadequacies of current UK end-use controls. The UK delivered at least £400m worth of military equipment to Indonesia between 1997 and 2005. 81 The most significant transfers took place toward the beginning of this period. These included Hawk jets, armoured personnel carriers and tanks. However transfers have continued to be arranged more recently: over the period 2001 to 2006 more than £100m worth of strategic goods were licensed for export to Indonesia. Licences have been granted for the transfer of armoured all-wheel drive vehicles, components for tanks, technology for the production of combat aircraft, and components for both combat aircraft and combat helicopters. 82
Yet Indonesia has committed persistent human rights abuses within the country, notably in West Papua and Aceh provinces against popular separatist movements. UK-supplied equipment has been used on numerous occasions by Indonesian forces in contravention of assurances that the equipment will not be used ‘offensively’ or in violation of human rights. For example:
• During the 2003 offensive in Aceh, the Indonesian military used Hawk aircraft, Scorpion tanks, Saracen armoured vehicles and military Land Rovers. Eyewitnesses said Hawks were used in bombing raids against villages, and Land Rovers were used by Indonesian Special Forces, the Kopassus, which have been widely accused of human rights abuses. A senior Indonesian military official admitted an intention to use UK-made Scorpion tanks, saying, ‘they will become a key part of our campaign to finish off the separatists.’ He went on: ‘maybe later the British foreign minister will have a fit’ 83 ; • In 2003 and 2004 UK-supplied Scorpion tanks were on several occasions filmed attacking separatist positions in Aceh; • In April 2004, the Indonesian Army used UK-made Stormer armoured personnel carriers to patrol the streets and intimidate GAM-sympathisers to register as voters; and • In November 2005, the Observer 84 reported that UK Tactica vehicles are being used against demonstrations in West Papua. 85
The task of the UK Government is to assess the level of risk; however the licensing process by its very nature means that there will be marginal cases where difficult decisions have to be made. It therefore remains incumbent upon the Government to mitigate the effects of possible errors of judgement or higher risks, and to strengthen end-use controls at the licensing stage by conducting, where appropriate, stringent follow-up checks once the
80 Daniel McGrory and Dominic Kennedy, Troops accused of gun-running for cocaine and cash , The Times (13 October 2006)
38 equipment has been exported. Indeed, an effective end-use monitoring system would help the Government by providing information that informs subsequent pre-delivery/licensing assessment, thus helping to prevent future diversion and misuse. That is not about redrawing the margins between and awarding and refusing licences so that a less stringent pre-licensing test is applied, but as an additional safeguard. The two systems should complement each other and would be most effective working in tandem.
While the Government has stated that it does use its overseas posts to conduct some form of follow-up monitoring of the end-use of UK supplied arms, the FCO have refused to publish any details regarding the instructions given to embassy staff on how to carry out monitoring. It does however appear that this process is neither systematic nor frequent. The Quad Committee has described the current arrangements as “a rather haphazard approach to end- use monitoring”.86 In addition, recent reports have indicated the removal of defence attaches, at least from some key embassies, is being considered.87 This would further undermine the already ‘haphazard’ approach to delivery verification and post-export checks, and highlights the need for a more formalised system which would not be held hostage by Government budget cuts.
The Quad Committee has repeatedly called on the Government to include more information on end-use (current reporting on arms exports does not include information on the identity or even the nationality of the end-user 88 ), and to establish a system of delivery verification and monitoring of end-use to ensure that the exported British military equipment is used as the Government intended. During the recent Quad Committee oral evidence session with Margaret Beckett, Roger Berry MP stated that “end-use is the be-all and end-all of the control regime, and whilst the scrutiny of the original licence application is central to trying to assure appropriate end-use and not inappropriate end-use, the value of overseas posts is in being able to spot, and this has happened in the past as we all know, circumstances where UK arms are in the wrong place – perhaps even, as we suggested, a more proactive scrutiny of exports to particular destinations.” 89
The UKWG recommends the Government establishes a formal system of end-use monitoring which addresses specific measures for monitoring certain controlled goods after they are exported, and includes:
• specific restrictions to be included in the contract and/or the licence on use or retransfer, for example the prohibition of re-export without permission (see section 2 below on ‘no re-export’ clauses); • provisions in the licence and/or contract stating that the UK Government reserves the right to conduct end-use checks; and • reference in the licence to the implications of breaching end-use undertakings, i.e. that all licences connected to the equipment or technology in question would be revoked, and that future licensing decisions would take any breaches into account (the Government may claim that breaches are already treated in this way, in which case it is not clear what objection there would be to making these consequences clearly understood on the licence).
But this safeguard would not be necessary for all UK arms transfers. Similar to the Quad Committee; which has called upon the Government to focus on cases where it has identified some degree of risk 90 . The UKWG instead calls for a system of targeted end-use monitoring.
86 Foreign Affairs - Second Joint Report Session 2002-2003, paragraph 120 (06 May 2003)
39 This would be prioritised to those arms transfers where a particular risk of diversion or misuse is identified. This requires a targeted use of limited resources against a matrix of likely risk factors.
The system could be organised so that monitoring is carried out only when there are specific concerns that the goods or technology in question are not being used according to the terms of the licence. The US has end-use monitoring systems of this type in place: the State Department Blue Lantern programme and the Department of Defence Golden Sentry programme operate on the principle that where a particular transfer trips a number of ‘red flags’, checks are carried out. For example, in 2006, the State Department performed 613 Blue Lantern checks, with 94 ‘unfavourable destinations’. 91 A similar system could be introduced in the UK, whereby the implications for resources would not necessarily carry a high administrative burden. The US in 2006 approved 35,991 permanent export licence applications and carried out 613 checks, which is the equivalent of one investigation for every 59 licences approved. 92 Were the same ratio to apply to the UK, the 7,474 Standard Individual Export Licences (SIELs) granted in 2006 93 would have generated 127 Blue Lantern- type checks.
As it stands, the ECA contains no provision for establishing a robust system of end-use monitoring and therefore does not address specific measures for monitoring controlled goods after they are exported. While the Government, if they so chose, could institute a comprehensive system of end-use monitoring without the need for primary legislation, this would then be dependent upon the good will of successive governments. Past experience suggests this may not be forever forthcoming. By introducing a requirement in primary legislation, subsequent governments will be obliged to maintain a monitoring system or change the law. Therefore, the UKWG recommends that the Government revisit the ECA and amend Section 7 to make provision for follow-up monitoring of the use made of goods exported, technology transferred, and technical assistance provided of the goods traded, in relation to any activities to which controls are capable of being imposed under the ECA. Therefore, the UKWG suggest that the following text is inserted into section 7 of the ECA:
• In this section ‘follow-up monitoring’ means the undertaking of activities designed to verify that the use to which the goods, technology or technical assistance are put, and the identity of the end-users of the goods, technology or technical assistance, are consistent with the obligations stipulated in the relevant licence or end-use documentation. • The ‘activities’ referred to may include but not be limited to physical inspection of the designated goods or technology within the territory of the state or the jurisdiction of the end-user stipulated in the relevant licence or end-use documentation.
Looking beyond the review, the UKWG would recommend that the UK raise this issue across the EU through the pooling of information sources and in-country diplomatic resources.
2. ‘No re-export’ clause
The UKWG recommends that the Government implement and enforce a ‘no re-export without permission’ clause into each and every export licence for all controlled goods and technology including components for use in controlled goods. A re-export clause would require the exporting state to gain the permission of the UK Government before onward export of any UK-origin products.
91 Registration & Compliance presentation made by David Trimble, Director of Defense Trade Controls Compliance, 2007 Export Controls Symposium (23 May 2007),
40 In February 2006, it was reported by The Hindu , that the Indian Government was in negotiations to sell Islander maritime-patrol aircraft, originally supplied by the UK, to Myanmar (Burma). Under an EU embargo, the UK has had various long-standing sanctions and embargoes in place to prevent the transfer of military equipment to Myanmar, in response to the continuing violations of human rights. It is reported that the UK Government has made representations to the Indian Government opposing the transfer, but according to The Hindu , the Indian Defence Ministry feels that the curb is unfair in the absence of a resale clause in the contract. An unnamed senior naval officer is quoted as saying “we should tell [the UK] where to get off.” 94 Consequently, two of the Islander maritime-patrol aircraft have been transferred by India to Myanmar, and India is reportedly still considering the transfer of further aircraft. 95
In addition, in October 2006, Jane’s Defence Weekly reported that the Indian Government was in negotiations to supply the Advanced Light Helicopter (ALH) to Myanmar. While the ALH is manufactured in India, EU companies, including from the UK, has considerable involvement in the development of the ALH, from the design to the provision of components and ammunition. Similar to the case involving the Islander maritime-patrol aircraft above, the transfer of the ALH to Myanmar would risk undermining the existing EU arms embargo.
However, it would seem that some of the companies involved in the supply chain for the helicopters were established in EU states with stronger re-export controls than exist in the UK. Following representations from the EU and several of its Member States, the Indian Government has apparently given assurances that no ALHs will be transferred. Precise reassurance is unknown; however, there is little doubt that these “no re-export without permission” clauses put the EU in a stronger position in their discussions with India.
Furthermore, in 2002 and 2003 a number of reports surfaced regarding the diversion of military equipment from third countries into Iraq. India, Jordan, Ukraine, the UAE and Yemen, all countries to which the Government authorised weapons sales in 2002, were suspected of being linked to the Iraqi military-equipment supply-chain. Such cases of possible diversion or misuse of UK equipment provides cause for concern that the current system remains inadequate.
These cases highlight the real necessity for the UK Government to implement and enforce a ‘no re-export without permission’ clause into each and every export licence for all controlled goods and technology including components for use in controlled goods. A re-export clause would require the exporting state to gain the permission of the UK Government before onward export of any UK-origin products. The former Foreign Secretary, Margaret Beckett, has even admitted that in the case of the India-Myanmar export, with the benefit of hindsight, a ban on re-export “might have been desirable” and that “if a similar export took place today one would consider” putting such a clause in place. 96
Therefore, the UKWG recommends that the Government amend section 12 (Licences and Permits) of the Export of Goods, Transfer of Technology and Provision of Technical Assistance (Control) Order 2003, to provide that any licence or Community Licence granted or issued by the Secretary of State in pursuance of this Order, may be subject to a no re- export without permission clause for any goods, software or technology specified in Schedule 1 of the Regulation.
3. Sustainable development
The UKWG recommends that sustainable development be included as a Relevant Consequence in the Schedule to the ECA
94 Dikshit, Sandeep, Curbs apply only to aircraft spares: UK , The Hindu (04 February 2006)
41
The UK Government has acknowledged, both unilaterally and in the context of its participation in international fora, the negative impact that sales of controlled goods and technology can have on sustainable development. Excessive or inappropriate arms purchases are a drain on social and economic resources that developing countries can ill afford. Insecure environments fuelled by the proliferation of arms also undermine sustainable development. This is implicitly acknowledged in article 26 of the UN Charter, which establishes the responsibility of states “to promote the establishment and maintenance of international peace and security with the least diversion for armaments of the world's human and economic resources”.
To this end, the inclusion of sustainable development as one of the criteria in the Consolidated EU and National Arms Export Licensing Criteria (announced on 26 October 2000) and in the ECA was a welcome recognition of the importance of the issue. However, it is of concern that sustainable development is treated as the ‘poor relation’ of all the criteria contained in the ECA, in that it is the only one of the Consolidated Criteria omitted from the schedule of Relevant Consequences, and thus has a weaker status in law. The fact that since the ECA entered into force no transfer licence has been refused based solely or in part on sustainable development grounds is testament to this reduced status. Moreover, the omission denies a future Secretary of State the power to introduce controls to safeguard sustainable development, as an export order can only be made for a purpose as elaborated in the schedule.
This is not to underestimate the difficulty of calculating the impact a transfer of controlled goods might have on sustainable development, but this difficulty makes it all the more important that sustainable development receives full protection under law. As things stand, any reference to sustainable development could be removed by a (future Secretary of State) should he or she so choose (see below). Elevating sustainable development so that it is included in the Schedule as a Relevant Consequence would address this problem.
Sustainable Development in the Schedule The UK Government has in the past argued that the inclusion of sustainable development in the Schedule is problematic because the Schedule is structured so as to limit the goods that can be controlled by the Act. In the House of Commons Report Stage debate in November, Nigel Griffiths stated that:
“The schedule describes the purposes for which the order imposing export controls or transfer controls can be made. The function of the schedule then is to govern the making of orders that specify the goods and technology, or classes of goods and technology that are to be subject to export controls.” 97
However, the Scott report and subsequent Government policy papers do not state that the orders made under the schedule should be goods-and-technology specific. During the Bill’s passage, legal advice regarding the implications of omitting sustainable development from the schedule was sought by the UKWG from an administrative law specialist from Matrix Chambers. The advice received contradicted the Government’s central argument, stating that the objective of the purposes in the schedule is not to set out the goods that can be controlled, but rather it is a general one: the purposes are simply those for which an order imposing export or transfer controls may be made. 98
The Government’s approach suggests a concern that some future administration might institute licensing requirements for a much broader range of goods than is currently the case. It must be said that it is far harder to envisage such a development than it is to conceive of the circumstances where, under the current ECA, a future administration drops all reference to sustainable development. While it is true that any financial transaction could have implications for sustainable development (eg a sale of 100 million biros could be deemed to be inappropriate to the needs of a small country and a drain on limited economic resources),
97 House of Commons Debates, Hansard 08 November 2001: Column 386. 98 Legal advice, Matrix Chambers (October 2001).
42 the UKWG would see this as irrelevant to the ECA and it is not clear where the pressure would come from to expand the range of goods covered by the act.
While the cost of the purchase is of course important when considering implications for sustainable development, the specific nature of the goods or technology is also critical. In addition to their macro-economic impact, military goods have a particular link to and implications for development. Arms fuel conflict, and conflict undermines development. As discussed in more detail below, the Government has on many occasions and in many fora already acknowledged this link. Indeed, the Export Credit Guarantee Department has identified spending on military equipment as “unproductive expenditure”, and as a consequence places additional hurdles in the path of any decision to provide export credit for arms transfers to the least developed states. Government insistence that sustainable development should not be included in the Schedule of Relevant Consequences because there is no specific link to the classes of goods and technologies that are subject to export controls can therefore be seen as both ill-advised and undermining the Government’s stated international policies, commitments and obligations (for more on this, see below).
The Government should therefore introduce the following new Relevant Consequence to the Schedule: An adverse effect on the technical and economic capacity of the recipient country, taking into account the desirability that states should achieve their legitimate needs of security and defence with the least diversion for armaments of human, social and economic resources.
Sustainable Development in the Guidance The ECA currently refers to sustainable development in section 9 (Guidance), whereby the Secretary of State has excessive discretion to remove or change sustainable development from the licence decision-making process. Once again, this formulation suggests that sustainable development considerations are of secondary import, as:
• the Secretary of State can remove sustainable development as a consideration altogether with minimal oversight by Parliament (see the section on prior parliamentary scrutiny below); and • the language of the phrase “if any” in the Guidance, whereby “[t]he guidance required … must include guidance about the consideration (if any) to be given, when exercising such powers, to … issues relating to sustainable development”, could allow Secretaries of State to not give consideration to sustainable development, even if it was relevant in that instance. 99
While the UKWG is of the opinion that sustainable development should be a Relevant Consequence, if reference continues to be limited to section 9, it is essential that the ability of the Secretary of State to remove this reference is restricted, and that the term “if any” is replaced with “so far as relevant”. According to legal advice, this would impose a duty to consider sustainable development etc in licensing decisions where relevant. 100 This would still provide the Government with some flexibility, giving them the option of not considering sustainable development in cases where it is clearly not relevant (such as an uncontroversial single small shipment of arms to, for example, Canada) but it prevents the Government from ignoring sustainable development where it is relevant. Furthermore, specific language needs to be inserted to make reference to least possible diversion for armaments of human, social and economic resources.
Therefore, the UKWG recommends that the wording in section 9 should be amended to state:
Issues relating to the compatibility of the arms exports with sustainable development of the recipient country, taking into account the desirability that states should achieve their legitimate needs of security and defence with the least diversion for armaments of human, social and economic resources.
99 Ibid 100 Ibid
43
As mentioned above, the Government has been clear on the potential negative impact of arms transfers on development. This has been within the context of much greater recent international attention to this issue.
On 8 December 2005, the 60 th UN General Assembly (UNGA) adopted a resolution on ‘addressing the negative humanitarian and development impact of the illicit manufacture, transfer and circulation of small arms and light weapons and their excessive accumulation’ 101 . This resolution emphasised the relationship between SALW issues and development. It built on the 2005 World Summit Outcome document, where global leaders recognised the strong linkage and mutual reinforcement between development, peace, security and human rights. 102 Another important milestone was the Organisation for Economic Co-operation and Development (OSCE) Development Assistance Committee (DAC) decision in March 2005 to include “support for controlling, preventing and reducing the proliferation of small arms and light weapons in those activities which qualify as development spending internationally”. The 2001 UN PoA mentions the connection between SALW and the impact they can have on reconstruction and development 103 . The UK Government recommended in a working paper submitted to the 2006 UN Preparatory Committee on the UN PoA that “we encourage the Chairman of the Preparatory Committee, in his final statement, to make clear reference to the links between small arms and light weapons and development…” 104
More recently, the UK, along with 41 other states, signed up to the Geneva Declaration on Armed Violence and Development in June 2006. 105 The Declaration acknowledges that sustainable security and a culture of peace must be promoted to ensure that armed violence and conflict do not impede realisation of the Millennium Development Goals. Realisation of these goals will only be achieved through the rigorous assessment of licensing applications to ensure that they do not divert resources away sustainable development. Sustainable development has become a high priority for the UK Government. In 2006, the FCO made sustainable development one of their key priorities in their White Paper Active Diplomacy for a Changing World: The UK's International Priorities. 106 In it’s submission to the UN Secretary General on the ATT, the UK Government made four very specific references to sustainable development; emphasising that States need to establish standards for arms transfers that do not undermine sustainable development. This highlights the growing need for the UK to put in place greater controls on conventional weapons and ensure that sustainable development has a much higher profile within the criteria used to determine licensing decisions.
Attempts to reach the Millennium Development Goals agreed in September 2000 by all 189 UN Member States are hindered when resources are diverted from this vital task by inappropriate arms transfers. In order to promote the social and economic rights of people in developing countries, it is imperative that exporting governments acknowledge and treat sustainable development as an issue of the first order in arms transfer licensing decisions. This needs to be made clear not only in terms of the operationalisation of assessment methodologies, but also formally at the legislative level.
101 Addressing the negative humanitarian and development impact of the illicit manufacture, transfer and circulation of small arms and light weapons and their excessive accumulation , United Nations General Assembly, A/RES/60/68, sixtieth session (06 January 2006),
44 4. End-use catch-all clause: terrorist acts
The UKWG recommends that the Government amends the Export of Goods, Transfer of Technology and Provision of Technical Assistance Control Order 2003 to make provisions for an end-use catch-all clause, if the exporter has knowledge, or suspicion of knowledge that a piece of equipment would be used in connection with terrorist acts.
Where the Government has determined that the UK should never be involved in supplying equipment in support of specified activities, it should use end-use catch-all controls to avoid loopholes whereby items not included on control lists are beyond regulatory reach. While a system of controlling goods contained within specific military and dual-use lists is the cornerstone of most export control systems, the ultimate purpose of export controls is to prevent certain types of activity or consequences. The challenges posed by technological advancement, the development of new products and the adaptability of certain dual-use goods and technologies all pose problems for a system that operates purely on the basis that only what is on the list is controlled.
Current catch-all clauses exist with regard to chemical, biological or nuclear weapons programmes and military end-use to embargoed destinations. However, the UKWG recommends that the Government consider establishing an additional catch-all control to cover other types of activities or consequences which are considered ‘beyond the pale’.
Most stakeholders appear to see value in extending catch-all controls to items which will be used in connection with terrorist acts 107 . The purpose of such a clause would be to state that if any UK person is aware, or ought to be aware, that the intended use of items is to facilitate acts of terrorism, irrespective of whether the item was on a control list, the transfer would be prohibited without the express permission of the Government in the form of an export licence.
It should be noted that the UK Government has already acknowledged the seriousness of acts of terrorism and international crime with regard to the transfer control regime, by including these as Relevant Consequences of the Schedule of the ECA. However, as recent reports have indicated, terrorist acts can be facilitated by non-listed goods, such as home- made bombs and box-cutters. Therefore it would seem sensible to extend coverage of the catch-all clauses to cover non-listed items which could be used to facilitate a terrorist act. This should reinforce the effectiveness of the laws contained within the Anti-terrorism, Crime and Security Act 2001.
The UKWG recommends that the Government amend Section 4 (export of dual-use goods and end-use control) of the Export of Goods, Transfer of Technology and Provision of Technical Assistance Control Order 2003, to provide that dual-use goods not listed in Annex I of the Regulation should be subject to the provisions of the Control Order, where –
• the exporter has been informed by a competent authority that such goods are or may be intended, in their entirety or in part, to be used in connection with terrorist acts; or • the export is aware that such goods are intended, in their entirety or in part, to be used in connection with terrorist acts; or • the exporter has grounds for suspecting that such goods are or may be intended, in their entirety or in part, to be used in connection with terrorist acts, unless the exporter has made all reasonable enquiries as to their proposed use and is satisfied that they will not be so used.
107 The term “terrorist acts” should be understood generally in this context to mean acts which are prohibited under international law, such as deliberate attacks on civilians, indiscriminate attacks, hostage taking, torture or deliberate and arbitrary killings, when the purpose of such an act, by its nature or context, is to intimidate a population or to compel a Government or an international organisation to do or to abstain from doing any act. There are some continuing disagreements around the use and definition of the term “terrorism”, particularly regarding the question of intent and whether states can commit acts of terrorism.
45 5. Transparency and reporting
The UKWG recommends that the Government includes public reporting and transparency in the review, and amends Section 10 of the ECA to include particular requirements for effective parliamentary and public scrutiny.
The UKWG is aware that the Government does not wish to include reporting and transparency within the review process. However the UKWG believes it is a weakness of the current legislation that the Act contains only a simple requirement for the Secretary of State to produce “a report on … matters [other than the export of objects of cultural interest] relating to the operation of this Act (and any order made under it) during the year” (section 10 of the ECA).
The Government has repeatedly claimed that the information contained in its Annual Reports on Strategic Export Controls has made the UK's export control system one of the most transparent in the world. While the current system is undoubtedly an improvement on the information provided by previous administrations and contains data not previously in the public domain, data per se is not equivalent to information.
The Scott Report, referring to the dangers of a culture of secrecy, states:
“Without the provision of full information it is not possible for parliament, or for that matter the public, to assess what consequences, in the form of attribution of responsibility or blame, ought to follow. A denial of information to the public denies the public the ability to make an informed judgement on the Government's record. A failure by Ministers to meet the obligations of Ministerial accountability by providing information on their departments undermines, in my opinion, the democratic process .” (Scott K8.3; emphasis added)
For effective parliamentary and public scrutiny, information covering all forms of UK transfers is required and the information needs to be current, precise, comprehensive and user-friendly. The annual and quarterly reports still contain significant omissions. For example, a lack of detailed information on end-use in relation to all export licences granted; data on actual deliveries of arms exports; detailed information on the final destination of incorporated goods and more specific information on Open Individual Export Licences such as quantities or values are still missing.
Besides the lack of detailed transparency, the current controls also lack the ability to bind future governments. The ECA only requires the Secretary of State to lay before Parliament each year a report on matters relating to the operation of this Act. This does not safeguard the current level of transparency for the future.
The UKWG urges the Government to include public reporting and transparency in the review, and recommends that the Government amend Section 10 of the ECA to include a new subsection which lays out the particular requirements for effective parliamentary and public scrutiny. This should include a requirement for:
• public reporting; • regular reporting, at a minimum every three months; • comprehensive data on the number, value, end-use(r) and type of equipment for all authorised transfers, including gifted and government-to-government transfers; and • comprehensive data on licence refusals, including the number, value, reason for denial, end-use(r) and type of equipment.
6. Government-to-government transfers.
The UKWG recommends that the Government amend the ECA to make provision binding the Crown, which would require the strict application of the Consolidated Criteria on all government-to-government sales, disposal sales and gifts.
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The Government should be obliged to and should be seen to apply the same transfer criteria when involved as a principal in a strategic transfer as they would to any commercial export or trade. However, this is currently not the case. Section 7 of the ECA states that an order under the Act “ may make provision binding the Crown” (emphasis added). However, the UKWG understands that this power was established to ensure the UK can comply with international legal commitments, for example EU Dual-Use regulations. Where only national laws apply, the Government has not used this power.
The Government sought to justify this approach during the House of Commons Committee Stage hearings on the Bill. Nigel Griffiths, the then Trade and Industry Minister in charge of the Bill, stated:
Our exports (i.e. government to government transfers) tend to be items of essential equipment used by our armed forces or in connection with important international collaborative defence projects such as peacekeeping and projects in Kosovo and Macedonia. Items are also exported for international development purposes such as mine clearance. 108
The UKWG acknowledged this argument at the time, and proposed that the power to bind the Crown could be subject to certain exceptions, but maintained and still maintains that there are many circumstances where the Crown must be bound, eg government-to-government sales, disposal sales and gifts, and for which a strict application of the Consolidated Criteria is essential. Most obvious of these have been the Al Yamamah contracts for sales to Saudi Arabia, which are now in the process of being supplemented by the sale of a further 72 Typhoon aircraft. Other government-to-government transfers of note include the transfer of 226 Challenger battle tanks to Jordan between 2002 and 2004, and the gifting to Nepal of two Mi17 helicopters in 2002 and of two STOL aircraft in 2004.
The Government has stated that it does in effect apply the same standards to government-to- government transfers as to commercial transactions, in which case we can see no reason why it refuses to allow the use of the same formal process. Changing the legislation so that it must bind the Crown (allowing for some exceptions) would simply guarantee that, at both the contract-negotiation stage and in terms of public and parliamentary scrutiny, the same standards are and will continue to be applied across the board (the current arrangement is at the sufferance of the Government and it would seem to be subject to change on a governmental whim).
The Scott Report recommended that the list of international organisations and Crown agencies exempt from export controls should be abolished. Furthermore, in its 2001 report on the draft Bill the Quad Committee suggested that “consideration be given to the desirability of ending the blanket exemption from controls of Government and its agencies as exporters of licensable goods and technology”. 109 The UKWG believes that the original arguments raised before the Export Control Act was passed retain their validity, and the Government should move to amend the legislation accordingly.
Therefore, the UKWG recommends that under section 7 of the ECA, the Government amend the statute to require the strict application of the Consolidated Criteria on all government-to- government transfers. Section 7(2) should be amended to state: “Such an order must make provision binding the Crown, except where…”
Reasonable exceptions would include transfers to UK forces overseas and to peacekeeping forces, but should be extremely limited, for example not to extend to government-to- government sales, disposal sales and gifts.
108 House of Commons, Standing Committee B (16 October 2001: afternoon session) column 130,
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7. Prior parliamentary scrutiny
The UKWG recommends that the Government establishes a system of prior parliamentary oversight of UK arms exports to ensure consistent application of the UK consolidated criteria for arms exports.
While parliamentary oversight of UK arms exports is relatively sophisticated compared to most EU partners, its efficacy is weakened by the fact that it is entirely retrospective. Prior parliamentary scrutiny of arms export licences would be a crucial element to ensure consistent application of the UK consolidated criteria for arms exports. The Quad Committee has long argued for a system of prior parliamentary scrutiny with a role for a parliamentary committee to scrutinise export licensing decisions before they are granted in order to provide advice to ministers in difficult case (as exists in Sweden); however the Government has so far insisted “that prior scrutiny of export licence applications raises unacceptable constitutional, legal and practical difficulties”. 110
The UKWG disagrees with these assertions by the Government. There are no constitutional impediments which would prevent Government from legislating to give Parliament a role in scrutinising arms export licences. Sub-delegation of the decision-making function need not be an issue as long as explicit reference is made in the ECA to the fact that such a role would be advisory only, and therefore would not infringe on the executive functioning of the licensing system. 111
In fact, the Quad Committee has stressed repeatedly that their committee would hold no decision-making powers and would act purely in an advisory capacity and thus will not be complicit in executive decisions.
Furthermore, consideration by the executive of the views of the legislature is not unprecedented. Lord Campbell-Savours, discussing this issue during the Committee Stage of the Export Control Bill in the Lords, referred to a number of instances in which Parliament has acted in an advisory function to Government in advance of any executive decision. He noted, for example, advice from the Transport select Committee with regards to the privatisation of the National Air Traffic Services (NATS) and to the merits of Public Private Partnership (PPP) for London Transport, from the Defence Committee with regards to the restructuring of the Territorial Army, and from the Home Affairs Select Committee with regard to consideration of ID cards. 112
These, examples demonstrate how the provision of prior advice need not damage the relationship between Parliament and the Executive, or the ability of Parliament to hold Government to account.
In addition, opponents to the idea of prior parliamentary scrutiny have argued that commercial competitiveness would be harmed if Parliament was granted an advisory role in reviewing licences as contractors would be reluctant to pursue licensing applications which could potentially disclose detailed and industry-sensitive information on purchasers and equipment, thus potentially risking the loss of a contract and/or alerting overseas competitors. Furthermore, additional risks to commercial competitiveness would stem from the practical considerations that come into play when including Parliament in an advisory role in reviewing licences, such as the delays such a system could involve.
However, the Quad Committee has itself proposed a scrutiny system that would deal with this issue, whereby proposed stage 2 notifications could be made in confidence, and would be preserved until the licence was granted and contract signed. Stage 2 notifications occur where the Quad Committee would advise the Government of those licence applications on
110 Quadripratite Select Committee Strategic Export Controls HMG’s Annual Report for 2003, Licensing Policy and Parliamentary Scrutiny First Joint Report of Session 2004–05 (15 March 2005), Recommendations paragraph 21,
48 which it would in due course wish to receive a further notification that the Government was intending to grant a licence. This would be required in only a small minority of cases, as opposed to stage 1 notification whereby all licence applications would be notified to the Quad Committee, including applications for Open Individual Export Licences (OIELs) and dual-use goods. The Quad Committee may seek some additional information or clarification in relation to a limited number of stage 1 notifications to enable it to decide whether or not as stage 2 notification was required. The Quad Committee would accept that it would be wholly its responsibility to inform the Government in respect of any individual licence application that a stage 2 notification was required. In serious instances, the Quad Committee may be required to report to the House of Commons, but details would be reported only with the agreement of both the Government and the applicant. At a minimum, the Government could establish a pilot model for certain sensitive arms transfers, on a trial basis, for example for transfers to countries under or recently under embargo.
In addition, it is worth noting that detailed information on purchasers and types of equipment under consideration is routinely reported by specialist publications, such as Janes , well before licensing applications have been submitted. From discussions with the defence industry, it would seem that that the key commercial sensitivities typically concern detailed pricing data and technical specifications – information which would be largely irrelevant to any Committee deliberations. With regard to delays to the application process, it is worth bearing in mind the current situation which is that applications most likely to be of concern to Parliament already exceed the 20-day target 113 , furthermore, the Quad Committee could consider the application concurrently with Government to maximise time constraints. Also, given that the Quad Committee’s role would be advisory only, the Government could set a time limit for receiving that advice, beyond which they could proceed with the licence application as per usual. Prior scrutiny measures exist in other countries, for example the USA and Sweden, without seeming to damage the export potential of arms from those countries.
The UKWG therefore recommends that the Government insert a new clause into the ECA, entitled “Strategic Exports Scrutiny Committee”, which either establishes;
a Committee, to be known as the Strategic Exports Scrutiny Committee, to examine United Kingdom defence export licence applications and the licensing process, and to provide advice to the Secretary of State on the exercise of the power to grant a licence required by Order under section 1, 2, 3 and 4 of the ECA .
Or states that:
The Secretary of State may take advice from [consult with] a parliamentary select committee before a determination regarding an application for a licence required by an order under section 1, 2, 3 or 4 is completed.
113 HMG’s published target is to process at least 70% of SIEL applications in 20 working days: UK Strategic Export Controls Annual Report 2006, section 3.8 (Performance in Processing Licence Applications),
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