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Strategic Export Controls: 2007 Review

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Strategic Export Controls: 2007 Review House of Commons Defence, Foreign Affairs, International Development and Trade and Industry Committees Strategic Export Controls: 2007 Review First Joint Report of Session 2006–07 Fourteenth Report from the Defence Committee of Session 2006-07 Seventh Report from the Foreign Affairs Committee of Session 2006-07 Eleventh Report from the International Development Committee of Session 2006-07 Tenth Report from the Trade and Industry Committee of Session 2006-07 Report, together with formal minutes, oral and written evidence Ordered by The House of Commons to be printed 23 July 2007 HC 117 Published on 7 August 2007 by authority of the House of Commons London: The Stationery Office Limited £0.00 The Committees on Strategic Export Controls (Quadripartite Committee) The Defence, Foreign Affairs, International Development and Trade and Industry Committees are appointed by the House of Commons to examine the expenditure, administration, and policy of the Ministry of Defence, the Foreign and Commonwealth Office, the Department for International Development, the Department of Trade and Industry , and any associated public bodies. Current membership DEFENCE: Rt Hon James Arbuthnot*§, Mr David S Borrow*, Mr David Crausby*, Linda Gilroy*, Mr David Hamilton, Mr Mike Hancock, Mr Dai Havard, Mr Adam Holloway, Mr Bernard Jenkin, Mr Brian Jenkins, Mr Kevan Jones, Robert Key*, Willie Rennie, John Smith. FOREIGN AFFAIRS: Mike Gapes*§, Mr Fabian Hamilton*, Rt Hon Mr David Heathcoat-Amory*, Mr John Horam*, Mr Eric Illsley, Mr Paul Keetch*, Andrew Mackinlay, Mr Malcolm Moss, Sandra Osborne, Mr Greg Pope, Mr Ken Purchase*, Rt Hon Sir John Stanley*, Ms Gisela Stuart, Richard Younger-Ross. INTERNATIONAL DEVELOPMENT: Malcolm Bruce*§, John Battle*, Hugh Bayley, John Bercow*, Richard Burden*, Mr Quentin Davies, James Duddridge*, Ann McKechin, Joan Ruddock, Mr Marsha Singh, Sir Robert Smith. The following Member was also a Member of the Committee during the period covered by this report: John Barrett* TRADE AND INDUSTRY: Roger Berry (Chairman of the Committees’ joint meetings)*, Mr Brian Binley*, Mr Peter Bone, Mr Michael Clapham, Mrs Claire Curtis-Thomas, Mr Lindsay Hoyle*, Mr Mark Hunter, Miss Julie Kirkbride, Peter Luff*§, Judy Mallaber*, Rob Marris, Anne Moffat, Mr Mike Weir, Mr Anthony Wright. * Member who participated in the inquiry leading to this Report § Chairman of a participating Committee Powers The Committees are departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in Standing Order No 152. The powers of the Committees to work together and agree joint reports are set out in Standing Order No. 137A. These Standing Orders are available on the Internet via www.parliament.uk. Publication The Reports and evidence of the Committees are published by The Stationery Office by Order of the House. Joint publications of the Committees (including press notices) are on the Internet at http:www.parliament.uk/parliamentary_committees/quad.cfm. All other publications of the Committees are on the Internet at www.parliament.uk and can be found by going to the webpage of any of the four participating Committees. A list of Reports of the Committees in the present Parliament is at the back of this volume. Committee staff The staff who currently work for the Committees on their joint inquiries into strategic export controls are: Glenn McKee (Clerk) and Anwen Rees (Committee Assistant). Contacts All correspondence should be addressed to the Clerk of the Quadripartite Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 8367; the Committee’s e-mail address is [email protected] ‘Quadripartite Committee’ Strategic Export Controls: 2007 Review 1 Contents Report Page Conclusions and recommendations 5 1 Introduction 19 Introduction 19 Review of export controls 19 The Government’s 2007 Consultation Document 20 The Committees’ review of the legislation 20 2 The work of the Committees 22 Relations between the Committees and the Government 22 Evidence and witnesses 22 Oral evidence 22 Written evidence 23 Visits 23 3 Review of export control legislation 25 Background to the legislation 25 Pre-legislative scrutiny 26 Aims of the legislation 26 Issues from the Scott Inquiry 27 Post-legislative scrutiny 27 Research 28 4 The legislative framework 32 The Export Control Act 2002: overall assessment 32 Parliamentary scrutiny of secondary legislation and guidance 32 Guidance 33 Clarity of the secondary legislation 34 Challenges in the courts 36 Notice of changes to the secondary legislation 36 Effectiveness of the legislation 36 Brokering and trafficking and extra-territoriality 37 Effectiveness of the extra-territorial controls 39 Extending the extra-territorial controls 41 Registration of brokers 47 “Catch-all” provisions (weapons of mass destruction) 49 Transfer of software (weapons of mass destruction) 52 5 Sustainable development 53 Legislative treatment of sustainable development 53 Role of Department for International Development 53 Impact of irresponsible and illegal arms transfers on developing countries 54 2 ‘Quadripartite Committee’ Strategic Export Controls: 2007 Review The number of refusals given on grounds of incompatibility with Criterion 8 54 Comparison with France 55 Conclusions on the weight given by the legislation to sustainable development 56 The filtering process for applications 57 Methodology used by DFID 59 Publication of the methodology 60 Bribery and corruption 60 6 Enforcement of the legislation 62 Introduction 62 Section 68(2) the Customs and Excise Management Act 1979 62 Compounding penalties 66 Co-ordination and comparison with other jurisdictions 67 Resources for prosecutions 69 Alternatives to prosecution under section 68(2) of the Customs and Excise Management Act 1979 70 Extension of administrative arrangements 70 Prosecution under section 68(1) of the Customs and Excise Management Act 1979 70 Use of warning letters 71 Disruption of exports of concern 72 Seizures 73 The role of the intelligence services 74 Level of penalties 75 Intangible transfers of technology 76 Effects on academic research 77 Open general licences 80 Compliance visits 82 Dual-use 85 Appeals 87 Exports to British forces operating overseas 88 Internet 88 Arms fairs 89 End-use 91 End-use controls on torture equipment 94 7 Gaps in the legislation 97 Licensed production overseas 97 Overseas subsidiary companies 102 Military End-Use Control (or “catch-all”) 103 Transportation and other services 106 Crown exemption 108 Prior scrutiny and end-use verification 111 Future Proofing 111 8 Effects on business and economic consequences of the legislation 113 Introduction 113 ‘Quadripartite Committee’ Strategic Export Controls: 2007 Review 3 Economic consequences 114 Burdens on business 114 Implementation of the controls on intangible transfers of technology 116 Transitional arrangements 116 Unforeseen consequences 117 Conclusions 118 9 Organisational and administrative issues 119 Export Control Organisation 119 ECO’s website 119 WMD publications by the ECO 120 Outreach: UK 120 5 year open individual export licences 121 Export enforcement agency 122 Monitoring of imports 122 Defence attachés 124 10 EU regulations and guidelines 126 Introduction 126 Transfers of military goods with the EU 127 New dual-use EU Regulations 129 Human rights 130 Transparency 132 Exports to Israel and Jordan 133 Saudi Arabia 136 Arms embargo on China 137 11 The international perspective 139 Arms trade treaty 139 Small arms 140 Bribery and corruption 141 International outreach 141 Multilateral Export Control Agreements 142 Cluster bombs 144 12 Annual and Quarterly Reports on Strategic Export Controls 146 Introduction 146 Date of publication of the Annual Report 146 2005 Annual Report on Strategic Export Controls 147 Annual Report: section on resources 147 Annual Report: section on policy overview 148 Annual Report: section containing “country by destination” statistics and analyses 149 2006 Quarterly Reports on Strategic Export Controls 150 Statistics on defence exports 152 Database of decisions 152 Specific cases raised with Government 153 4 ‘Quadripartite Committee’ Strategic Export Controls: 2007 Review 13 Conclusion 154 Annex 155 Formal minutes 157 Witnesses 161 List of written evidence 162 Reports from the Defence, Foreign Affairs, International Development and Trade and Industry Committees since 2001 164 ‘Quadripartite Committee’ Strategic Export Controls: 2007 Review 5 Conclusions and recommendations 1. We conclude that the Export Control Act 2002 has provided a sound legislative basis for controlling and regulating the UK’s strategic exports but with gaps and shortcomings. The challenge of increased globalisation of the defence industry, the fast pace of technological development, changing proliferation patterns and procurement methods for weapons of mass destruction (WMD) programmes and the threat from terrorists suggest to us that the 2002 Act may not surpass the record of its predecessor, the Import, Export and Customs Powers (Defence) Act 1939, to remain on the statute book for over 60 years without extensive amendment. We expect the current legislation will need to be reviewed, and possibly amended, regularly. (Paragraph 6) 2. We recommend that the Government agree to reply fully—other than in exceptional circumstances—within six weeks to our letters on decisions to grant or withhold export licences. (Paragraph 9) 3. We recommend that the Government carry out a government-wide
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