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House of Commons Business and Enterprise, Defence, Foreign Affairs and International Development Committees House of Commons Business and Enterprise, Defence, Foreign Affairs and International Development Committees Scrutiny of Arms Export Control (2008): UK Strategic Export Controls Annual Report 2006, Quarterly Reports for 2007, licensing policy and review of export control legislation First Joint Report of Session 2007-08 Eighth Report from the Business and Enterprise Committee of Session 2007-08 Twelfth Report from the Defence Committee of Session 2007-08 Eighth Report from the Foreign Affairs Committee of Session 2007-08 Eighth Report from the International Development Committee of Session 2007-08 Report, together with formal minutes, oral and written evidence Ordered by The House of Commons to be printed 3 July 2008 HC 254 Published on 17 July 2008 by authority of the House of Commons London: The Stationery Office Limited £0.00 The Committees on Arms Export Controls The Business and Enterprise, Defence, Foreign Affairs and International Development Committees are appointed by the House of Commons to examine the expenditure, administration, and policy of the Department for Business, Enterprise and Regulatory Reform, the Ministry of Defence, the Foreign and Commonwealth Office, the Department for International Development and any associated public bodies. Current membership BUSINESS AND ENTERPRISE: Roger Berry (Chairman of the Committees’ concurrent meetings)*, Peter Luff*§, Mr Adrian Bailey*, Mr Brian Binley, Mr Michael Clapham*, Mr Lindsay Hoyle, Miss Julie Kirkbride, Anne Moffat, Mr Mark Oaten*, Mr Mike Weir*, Mr Anthony Wright. 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*, John Smith, Richard Younger-Ross. FOREIGN AFFAIRS: Mike Gapes*§, Rt Hon Sir Menzies Campbell QC, Mr Fabian Hamilton*, Rt Hon 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. INTERNATIONAL DEVELOPMENT: Malcolm Bruce*§, John Battle*, Hugh Bayley, John Bercow, Richard Burden*, Mr Stephen Crabb, Daniel Kawczynski, Ann McKechin, Jim Sheridan, Mr Marsha Singh*, Sir Robert Smith. * 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 James Bowman (Committee Assistant). Contacts All correspondence should be addressed to the Clerk of the Committees on Arms Export Controls, 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] Scrutiny of Arms Export Controls (2008) 1 Contents Report Page Conclusions and recommendations 5 1 Introduction 11 The Government’s Review of Export Controls 11 Allegations of bribery and corruption 13 Review of annual and quarterly reports on strategic export controls 14 2 The work of the Committees 15 Relations between the Committees and the Government 15 Review of drafts of secondary legislation 15 Evidence and witnesses 15 Oral evidence 15 Written evidence 16 Visits 17 3 Review of export control legislation 18 Introduction 18 Research 18 Brokering, trafficking and extra-territoriality 20 Control of transport and ancillary services 24 Registration of brokers 25 End-use control for torture equipment 26 Re-exports 27 Licensed production overseas 28 “Single action” clause 29 Military end-use control 30 4 Enforcement 32 Introduction 32 Seizures by HM Revenue and Customs 32 Level of penalties 33 Open licences 34 Compliance visits 35 Civil penalties 36 Bribery overseas 37 5 Organisational and operational issues 38 Export Control Organisation 38 Export enforcement agency 39 Defence Export Sales Organisation (DESO) 40 F680 process 41 Defence attachés 42 Monitoring of imports 42 The UK Annual Report on strategic export controls 43 2 Scrutiny of Arms Export Controls (2008) The date of publication of the annual report on strategic export controls 43 Form and content of annual reports on strategic export controls 44 Quarterly reports 44 Specific cases raised with Government 45 Libya 46 Criterion 8: sustainable development 47 Open Individual Trade Control Licence: Ivory Coast 48 Outreach report 49 6 Allegations of corruption in defence contracts in the 1970s 50 Introduction 50 Allegations made in June 2003 50 The 1976 Guidelines 51 The June 1976 case 52 Extra territorial jurisdiction for criminal offences 55 7 Challenging bribery and corruption 56 Introduction 56 Guidance to those dealing with exports 56 Risk of bribery and corruption 56 The Salam project 59 Enforcement 60 8 The EU and the international perspective 61 Introduction 61 Review of the EU Code of Conduct on Arms Exports 61 Peer review of implementation of EU Council Regulation 1334/2000 62 Changes to dual-use regulations 62 Intra- EU transfers 63 Slovak arms to Sri Lanka 64 International arms trade treaty 65 Proliferation Security Initiative 66 Arms embargo on China 66 Criteria for sponsorship of visits to arms fairs 68 Cluster munitions 69 Annex 1: Letter from the Chair of the Committees to the Department for Business, Enterprise and Regulatory Reform 72 Annex 2: Note on the visit to the Port of Southampton 73 1. Port visit — Detection operations 73 2. Proliferation Security Initiative (PSI) 74 3. The Knight Case 75 3. The Gyrocompass Case 77 4. The National Clearance Hub at Salford (NCH) 78 Annex 3: Glossary of acronyms and initials 80 Scrutiny of Arms Export Controls (2008) 3 Formal Minutes 81 Witnesses 85 List of written evidence 86 List of Reports from the Committees during the current Parliament 87 Scrutiny of Arms Export Controls (2008) 5 Conclusions and recommendations 1. We conclude that the Government is to be commended for bringing forward the Export Control (Security and Para-military Goods) Order 2008, to prevent the export of, and trading in, sting sticks. (Paragraph 6) 2. We conclude that two weeks to comment on the draft Trade in Goods (Categories of Controlled Goods) Order 2008 was wholly inadequate. We recommend that the Government ensure that interested parties have at least two months to comment on the drafts of the third tranche of secondary legislation implementing the Government’s conclusions on the outcome of its Review of Export Controls. (Paragraph 14) 3. We recommend that the Government take steps to demonstrate the effectiveness of the export control system. (Paragraph 23) 4. We conclude that it is necessary to extend extra-territorial controls to cover the export of, and trading in, small arms, MANPADS and cluster bombs and we welcome the Government’s decision to do this in the Trade in Goods (Categories of Controlled Goods) Order 2008. (Paragraph 27) 5. In the absence of a wide-ranging and enforceable international arms trade treaty we conclude that there is an overwhelming case for the UK to extend its extra-territorial controls further. (Paragraph 30) 6. We reiterate the recommendation we made last year that the Government bring forward proposals to extend the extra-territorial provisions of the export control legislation to encompass trade in all items on the Military List and that all residents in the UK and British citizens overseas be required to obtain trade control licences, or be covered by a general licence, before engaging in any trade in the goods on the Military List. In order not to undermine the employment prospects of British citizens working for reputable organisations, we further recommend that the Government issue general licences covering British citizens working overseas and engaged in categories of trade between specified countries or in certain activities such as advertising. (Paragraph 31) 7. We conclude that the Government should make its decision whether or not to include the control of transport and ancillary services within new Category B provided by the Trade in Goods (Categories of Controlled Goods) Order 2008 on the basis of evidence made available to the Committees, including any practical experience in other countries of implementing such provisions. In addition, the Government should consider not only the services to include but the nature of the control and the duties and liabilities that can reasonably be placed on those providing ancillary services. (Paragraph 33) 8. We reiterate our recommendation made previously that the Government establish a register of arms brokers. (Paragraph 36) 6 Scrutiny of Arms Export Controls (2008) 9. We conclude that the Government is right to seek to introduce an end-use control on torture equipment through the EU. If this is not possible, we recommend that such a control should be introduced by the UK. (Paragraph 38) 10. We reiterate our recommendation that it should become a standard requirement of licensing that export contracts for goods on the Military List contain a clause preventing re-export to a destination subject to UN or EU embargo. In addition, we recommend that the contracts include a subrogation clause allowing the UK Government to stand in the place of the exporter to enforce the contract in British or foreign courts.
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