House of Commons Defence, Foreign Affairs, International Development and Trade and Industry Committees Strategic Export Controls Annual Report for 2002, Licensing Policy and Parliamentary Scrutiny First Joint Report of Session 2003–04 Fourth Report from the Defence Committee of Session 2003–04 Sixth Report from the Foreign Affairs Committee of Session 2003–04 Fifth Report from the International Development Committee of Session 2003–04 Fourth Report from the Trade and Industry Committee of Session 2003–04 Report, together with formal minutes, oral and written evidence Ordered by The House of Commons to be printed 5 May 2004 HC 390 Published on 18 May 2004 by authority of the House of Commons London: The Stationery Office Limited £22.00 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: Mr Crispin Blunt*, Mr James Cran, Mr David Crausby, Mike Gapes, Mr Bruce George*§, Mr Mike Hancock, Mr Dai Havard, Mr Kevan Jones, Mr Frank Roy, Rachel Squire*, Mr Peter Viggers*. FOREIGN AFFAIRS: Donald Anderson*§, Mr David Chidgey, Mr Fabian Hamilton*, Mr Eric Illsley, Mr Andrew Mackay*, Andrew Mackinlay, Mr John Maples*, Mr Bill Olner*, Mr Greg Pope, Sir John Stanley*, Ms Gisela Stuart. INTERNATIONAL DEVELOPMENT: Tony Baldry*§, John Barrett*, Mr John Battle*, Hugh Bayley, Ann Clwyd*, Mr Tony Colman*, Mr Quentin Davies*, Mr Piara S Khabra*, Chris McCafferty, Mr Andrew Robathan, Tony Worthington*. TRADE AND INDUSTRY: Mr Roger Berry (Chairman of the Committees’ joint meetings)*, Richard Burden, Mr Michael Clapham, Mr Jonathan Djanogly, Mr Nigel Evans*, Mr Lindsay Hoyle, Mr Andrew Lansley*, Mrs Jackie Lawrence, Mr Martin O’Neill*§, Linda Perham, 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. All publications of the Committees (including press notices) 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 joint 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: Steven Mark (Clerk), Christopher Dawnay (Committee Specialist) and Sheryl Dinsdale (Committee Assistant). Contacts All correspondence should be addressed to the Clerk of the Committees on Strategic Export Controls, House of Commons, London SW1A 0AA. The telephone number for general enquiries is 020 7219 5745; the Committees’ email address is [email protected] ‘Quadripartite Committee’: Strategic Export Controls—Annual Report for 2002 1 Contents Report Page Summary 3 1 Introduction 5 Course of inquiry 5 Co-operation with Government 6 Information not supplied 6 Information denied 7 2 Information and scrutiny 9 Transparency: the state of play 9 Changes already announced to the Annual Report 10 The case for a wider review 11 End-use information 11 Examples of misleading information 12 Implications for transparency and scrutiny 13 Actual exports 16 Improving parliamentary scrutiny 17 3 Scrutiny of licensing decisions and implementation of the criteria 18 Individual licensing decisions during 2002 18 General issues 19 Criterion Eight (Sustainable Development) and the involvement of the Department for International Development in the licensing process 20 Government and the supply side of defence exports 21 4 End use assurances: Indonesia 26 Introduction 26 Some recent history 26 Purpose and transparency 26 Use of British equipment in Aceh 27 Monitoring possible breaches of the assurances 29 Available sanctions 30 Conclusion: monitoring assurances 31 5 European Union 32 Code of Conduct 32 Ongoing review of the Code 33 Differing interpretation by different member states - does it matter? 35 Denial notification and undercut procedure 36 Embargo on China 38 Calls for change 39 The British position 39 The arguments 39 The need for clarity 41 2 ‘Quadripartite Committee’: Strategic Export Controls—Annual Report for 2002 Effect on British business 41 WMD Action Plan and involvement of Commission 42 Controlling equipment used in torture and capital punishment 42 Consistency and the role of the European Commission 43 Peer review process 44 Enlargement 44 Standard of control in accession states 45 Outreach and support 46 Membership of export control regimes 47 6 Wider international arrangements 48 Existing international export control regimes 48 Proposal for an Arms Trade Treaty 49 Export control issues in other international organisations 52 New arrangements 53 7 Enforcement in the UK 54 Preventing undesirable exports: the criminal and the unintentional 54 Bureaucracy and competitiveness 55 Results of JEWEL review 56 New controls under the Export Control Act 58 Extra-territoriality 58 Impact on industry 62 Role of Customs and Excise 66 Intangible transfers 67 Capacity 68 8 Conclusion 69 Annex: Letter to the Foreign Secretary 70 Conclusions and recommendations 73 Formal minutes 83 Witnesses 86 List of written evidence 87 ‘Quadripartite Committee’: Strategic Export Controls—Annual Report for 2002 3 Summary This Report continues a five-year dialogue with Government on how it controls strategic exports (equipment and technology with a military application). We have examined a wide range of the Government’s licensing decisions taken in 2002 and 2003, and have found the vast majority to be uncontentious. The way in which the Government publishes information on these decisions in its Annual Reports has led to misunderstandings and to avoidable criticism. It is time for a review of these Reports. The information should be published every quarter so that it is provided sooner after licences are granted. It should also enable us and the public to identify more accurately those decisions which give rise to genuine concerns, and we call for the provision of more information on who the Government allows military equipment to be exported to, and under what conditions. We are concerned about how the Government seeks to ensure that equipment is not misused by those to whom it has been provided. For example, the Government does not seem to have investigated adequately claims that equipment exported to Indonesia has been used in military operations in Aceh province in breach of assurances previously given, and possibly in violation of human rights. The EU Code of Conduct on Arms Exports is the basis for decisions throughout the Union. It is currently under review. The Government’s priorities for this review are sound, but should go further. The EU’s military embargo on China is also under review: because of continuing human rights abuses, it should not be lifted, but it should be clarified. The ten new member states joining the EU should be offered all the assistance necessary to ensure they are in a position to implement effective export controls in line with the EU Code. Export controls are only an effective tool against proliferation if they are applied internationally. A further diplomatic effort should be made to ensure that international export control regimes work as channels for sharing information. If they cannot be made to work, they should be rethought. A proposal for an international arms trade treaty to address the very real problem of proliferation, and small arms proliferation in particular, has not attracted support from governments. If it is not the right solution to this problem, another needs to be found urgently. The British export control system is complex and often misunderstood, even by industry. It should impose no more burdens on British industry than necessary. Changes have recently been made, but other European countries seem to have simpler systems, which appear to give their industries a competitive advantage on the export market. The British system has been made even more complicated with the introduction of controls on trade between second and third countries and on intangible (electronic) transfers of military technology. We are not convinced that the new system targets as accurately as it should those activities of most proliferation concern. We believe that the law should in certain circumstances control British citizens engaging abroad in trade in those weapons most likely to be used by terrorists or in civil wars. HM Customs & Excise currently bring very few prosecutions for breaches of export controls. It is essential that they and the intelligence and security agencies are adequately resourced if illegal proliferation is to be stemmed. ‘Quadripartite Committee’: Strategic Export Controls—Annual Report for 2002 5 1 Introduction Course of inquiry 1. Since April 1999, the Defence, Foreign Affairs, International Development and Trade and Industry Committees have regularly met together to consider the Government’s strategic export control system—an arrangement which has become known as the “Quadripartite Committee”. These inquiries have now been ongoing for five years. While we have tried to make this Report self-standing, a better sense of its full context will be gained by reading our previous Reports and the Government’s replies to them. A list of all our Reports so far this Parliament is published at the back of this volume. A fuller description of the British export control system and of our joint work can be found in our first Report of this Parliament.1 2.