Scrutiny of Arms Exports—Business, Innovation and Skills, Defense, Foreign Affairs and International Development - Vol.2

House of Commons Business, Innovation and Skills, Defence, Foreign Affairs and International Development Committees

Scrutiny of Arms Exports (2012): UK Strategic Export Controls Annual Report 2010, Quarterly Reports for July to December 2010 and January to September 2011, the Government's Review of arms exports to the Middle East and North Africa, and wider arms control issues First Joint Report of Session 201213Second Report from the Business, Innovation and Skills Committee of Session 201213 Fourth Report from the Defence Committee of Session 201213 First Report from the Foreign Affairs Committee of Session 201213 Second Report from the International Development Committee of Session 201213

Volume IIOral and written evidence and the Committees' correspondence with MinistersOrdered by the House of Commons to be printed 2 July 2012HC 419-II Incorporating HC 1697, Session 2010-12Published on 13 July 2012 by authority of the House of Commons London: The Stationery Office Limited 18.50

The Committees on Arms Export ControlsThe Business, Innovation and Skills, 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, Innovation and Skills, the Ministry of Defence, the Foreign and Commonwealth Office, the Department for International Development and any associated public bodies. Current membership BUSINESS, INNOVATION AND SKILLS: Mr Adrian Bailey*, Mr Brian Binley, Paul Blomfield, Katy Clark*, Julie Elliott, Rebecca Harris, Margot James*, Simon Kirby, Ann McKechin*, Mr David Ward, Nadhim Zahawi* DEFENCE: Rt Hon James Arbuthnot, Mr Julian Brazier, Thomas Docherty, Rt Hon Jeffrey M. Donaldson*, John Glen*, Mr Dai Harvard, Mrs Madeleine Moon, Penny Mordaunt,* Sandra Osborne, Sir Bob Russell, Bob Stewart*, Ms Gisela Stuart FOREIGN AFFAIRS: , Rt Hon Sir John Stanley* (Chair of the Committees concurrent meetings), Richard Ottaway, Rt Hon Mr Bob Ainsworth, Mr John Baron, Rt Hon Sir Menzies Campbell, Rt Hon Ann Clwyd*, Mike Gapes*, Mark Hendrick, Andrew Rosindell, Mr Frank Roy, Rory Stewart*, Mr Dave Watts* (left Committee 25/6/2012) INTERNATIONAL DEVELOPMENT: Rt Hon Sir Malcolm Bruce*, Hugh Bayley, Richard Burden*, Mr Sam Gyimah, Richard Harrington, Pauline Latham, Jeremy Lefroy, Mr Michael McCann, Alison McGovern, Fiona ODonnell*, Chris White* * Member who participated in the inquiry leading to this Report Chair 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 news items) are on the internet at http://www.parliament.uk/business/committees/committees-a-z/othercommittees/committee-on-arms-export-controls/. Committee staff The current staff of the Committees are Keith Neary (Clerk), Vanessa Hallinan (Committee Assistant), and Alex Paterson (Media Officer) 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 2420; the Committees email address is [email protected]

WitnessesMonday 23 January 2012Roy Ibister, Team leader, Small Arms and Transfer Controls, Saferworld, Oliver Sprague, Programme Director, Military Security and Police, Amnesty International UK, and Martin Butcher, Policy Adviser, Arms Campaign, Oxfam GB David Hayes, Chairman of EGAD, David Hayes Export Controls, Bernadette Peers, Compliance Manager, Strategic Shipping Company Ltd, Brinley Salzmann, Secretary of EGAD, ADS Group Ltd, and Barry Fletcher, Executive Committee Member of EGAD, Fletcher International Export ConsultancyPage

Ev 1

Ev 9

Tuesday 7 February 2012Rt Hon Dr Vince Cable MP, Secretary of State for Business, Innovation and Skills and President of the Board of Trade, Tom Smith, Head of the Export Control Organisation, Department for Business, Innovation and Skills, and Chris Chew, Head of Policy, Export Control Organisation Rt Hon William Hague MP, Secretary of State for Foreign and Commonwealth Affairs, Sarah MacIntosh, Director of Defence and International Security, Foreign and Commonwealth Office, and David Hall, Deputy Head, Counter-Proliferation Department, Foreign and Commonwealth Office

Ev 16

List of printed written evidence1 2 3 4 5 6 Dr Neil Cooper, Peace Studies, University of Bradford Campaign Against Arms Trade (CAAT) Export Group for Aerospace and Defence (EGAD)s UK Working Group on Arms (UKWG) The Rt Hon Vince Cable MP Secretary of State for Business, Innovation and Skills Amnesty International UK Ev 56 Ev 56; Ev 57 Ev 33 Ev 36 Ev 40; Ev 54 Ev 43; Ev 58

The Committees correspondence with MinistersCAECs correspondence with Ministers since the last Report (HC686) published on 5 April 2011. Date07/04/2011 14/07/2011 18/07/2011

FromAlistair Burt Chairman Chairman

ToChairman Foreign Secretary Foreign Secretary

SubjectThe Committees 2011 Report HC686 Review of Arms Exports CAACs questions on the Governments Response Cm 8079 to the Committees 2011 Report HC686 US/UK Defence Trade Cooperation Treaty Review of Arms Exports US/UK Defence Trade Cooperation Treaty Anders Breivik CAECs questions on the Governments Response Cm 8079 to the Committees 2011 Report HC686, and questions on the Review of Arms Exports Review of Arms Exports The Governments Annual Report on Arms Exports 2010 HC 1042 2010 Q3 & Q4 questions and answers Anders Breivik Priority Markets list Review of Arms Exports and Overseas Security and Justice Assistance Human Rights Guidance Priority Markets list Review of Arms Exports and Overseas Security and Justice Assistance Human Rights Guidance Overseas Security and Justice Assistance Human Rights Guidance 2010 Q3 & Q4 questions and answers

Evidence reference62 63

63

21/07/2011 30/07/2012 05/08/2012 05/09/2011 30/09/2011

Chairman Foreign Secretary Foreign Secretary Chairman Foreign Secretary

Foreign Secretary Chairman Chairman Vince Cable Chairman

65 66 66 67

67

01/10/2012 19/10/2011

Foreign Secretary Chairman

Chairman Foreign Secretary

143 143

24/10/2011 08/11/2011 21/11/2011 21/11/2011

Chairman Vince Cable Chairman Chairman

Foreign Secretary Chairman Vince Cable Foreign Secretary

148 149 149

149 149 150

08/12/2011 09/12/2011

Vince Cable Foreign Secretary

Chairman

15/12/2011

Foreign Secretary

Chairman Chairman

150

16/12/2011

Chairman

Foreign Secretary

151

Date16/12/2011

FromChairman

ToForeign Secretary

SubjectThe Governments Annual Report on arms exports 2010 HC 1042 Guy Savage The Governments Annual Report on arms exports 2010 HC 1042 "Brass plate" companies, Pre-licensed registration of arms brokers, Extraterritoriality Internal repression Thor Liberty Guy Savage China "Brass plate" companies, Pre-licensed registration of arms brokers, Extraterritoriality Thor Liberty Internal repression Thor Liberty China Priority Markets list Embargo on Somalia Export of Tasers Trade Exhibitions Overseas Security and Justice Assistance Human Rights Guidance Trident Westminster Hall Human Rights debate follow-up Human rights, Consolidated Criteria, Bahrain 2010 Q3 & Q4 questions and answers Bahrain and Yemen Lord Alton's Re-Export Controls Bill National Counter Proliferation Strategy 2012 2015 Trade Exhibitions Bahrain and Yemen Argentina arms exports Egypt arms exports

Evidence reference151 151 Annex 11

16/12/2011 07/01/2012

Chairman Foreign Secretary

Vince Cable Chairman

10/01/2012

Chairman

Vince Cable

152 152 154 154 154

16/01/2012 17/01/2012 19/01/2012 25/01/2012 02/02/2012

Chairman Chairman Vince Cable Chairman Vince Cable

Foreign Secretary Foreign Secretary Chairman Foreign Secretary Chairman

155 156 156 163 164 164 165 165 166 166

02/02/2012 06/02/2012

Vince Cable Foreign Secretary

Chairman Chairman

06/02/2012 06/02/2012 08/02/2012 13/02/2012 20/02/2012

Vince Cable Alistair Burt Alistair Burt Vince Cable Foreign Secretary

Chairman Chairman Chairman Chairman Chairman

20/02/2012 20/02/2012

Foreign Secretary Alistair Burt

Chairman Chairman

21/02/2012 28/02/2012 08/03/2012 21/03/2012

Foreign Secretary Foreign Secretary Vince Cable Alistair Burt

Chairman Chairman Chairman Chairman

167 178 56 Annex 12

26/03/2012 16/04/2012 26/04/2012 26/04/2012

Vince Cable Chairman Foreign Secretary Alistair Burt

Chairman Foreign Secretary Chairman Chairman

180 181 181 181

Date01/05/2012

FromForeign Secretary

ToChairman

SubjectBahrain and Yemen

Evidence reference183

List of Reports from the Committee during the current ParliamentThe reference number of the Governments response to each Report is printed in brackets after the HC printing number.

Session 201012 First Joint Report Scrutiny of Arms Export Controls (2011): UK Strategic Export Controls Annual Report 2009, Quarterly Reports for 2010, licensing policy and review of export control legislation HC 686 (Cm 8079)

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Committees on Arms Export Controls: Evidence Ev 1

Oral evidenceTaken before the Committees on Arms Export Controls on Monday 23 January 2012Members present: Sir John Stanley (Chair) Malcolm Bruce Richard Burden Katy Clark Ann Clwyd Mike Gapes John Glen Ann McKechin Penny Mordaunt Bob Stewart Mr Dave Watts Chris White ________________ Examination of Witnesses Witnesses: Roy Ibister, Team leader, Small Arms and Transfer Controls, Saferworld, Oliver Sprague, Programme Director, Military Security and Police, Amnesty International UK, and Martin Butcher, Policy Adviser, Arms Campaign, Oxfam GB, gave evidence. Chair: Mr Ibister, Mr Sprague and Mr Butcher, welcome to you. You will be glad to see that we have a good turnout from the Committees for you. Just before we start, one new document has come into the public domain in the last few days; it would not be reasonable for us to put questions to you on it, but we are certainly interested in having your views about it. It is the Governments publication Overseas Security and Justice Assistance: Human Rights Guidance, and we would be grateful for any views you would like to put to us by way of written evidence as to how satisedor possibly not so satisedyou are with the Governments position on human rights guidance. However, we are going to start with some questions on the arms trade treaty. Mike Gapes is going to lead off for us. Q1 Mike Gapes: Thank you, Chairman. You all understand very well the arms trade treaty and what has been going on; it has been on the agenda for seven, eight or 10 years, and we are coming to the conclusion of the process. I understand that a preparatory meeting is coming up next month, and there was one recently. At the last one, the Chair produced a draft paper, and I would be interested in your assessment of that paperwhat is in it and what is not in it, and whether it meets all the essential human rights and humanitarian issues or is inadequate in any way. Martin Butcher: The Chairs paper that was produced at the end of the last PrepCom, in July last year, is broadly a good document. There are some gaps in it, and one glaring gap would be the absence from scope of police and internal security equipment. We feel that the need for the regulation of that, and its inclusion in the ATT, has been shown very clearly in the Arab spring. We also have some concerns that there is no mention in the criteria for export controls of genderbased violence or armed violence outside conict. There are also one or two other problems. For example, brokering is mentioned only in the sense that you need to register brokers, not that the deals they do need to be licensed. There is no mention in the scope of transfers to be regulated of prior authorisation of transit or trans-shipment across a countrys territory. It would be hard for a nation to meet its obligations under the ATT if it did not know what weapons or other equipment were being shipped across its territory by another country. The recent events in Cyprus have highlighted this question of transit, and we will come back to that later. But, as I say, overall we view the paper as a good basis for negotiation this coming summer. It is the result of two years hard work, and we feel that it should be the paper that the negotiators work from in the summer. There are some moves to block this there are one or two states that just do not want the paper to be used at all and others that would like it to be used as an aide-mmoireand we would hope that the Government will resist those pressures and stand up very rmly for the paper as the basis for negotiations in the summer. Q2 Mike Gapes: Does either of you want to add anything? Oliver Sprague: I would just second what my colleague, Martin, said. For Amnesty, it is essential that the potentially lethal end of law enforcement equipmenttear gas, crowd control ammunition etc.is within the scope of the Oslo treaty, as we have seen in the conicts in Bahrain, Egypt and Libya. These things are used and they contribute to death and serious human rights violations. It seems odd that you could classify something by the nature of what it is. For example, the fact that it is a munition may well be covered, but the fact that it is a tear gas munition means that it might not be, so that creates an inadvertent loophole. The same applies to police and internal security vehicles. You could create a loophole in the scope by painting something blue, which in effect says, This is not a military vehicle; it is a police vehicle. Those are the things on scope that we want to see tightened up. At the moment, the requirements on transparency in the Chairs paper have no explicit reference to make public the reporting of Government arms transfers. If

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Ev 2 Committees on Arms Export Controls: Evidence

23 January 2012 Roy Ibister, Oliver Sprague and Martin Butcher

that is the case, we as a civil society, you as parliamentarians and other Governments will nd it very difcult to scrutinise a Governments implementation of their treaty obligations. A commitment for public transporting on arms transfers is pretty important. Q3 Mike Gapes: You said, Mr Butcher, that it is not entirely what you would like, but you have also said that a number of countries are resistant to even this. Is it going to be extremely difcult to strengthen this text from what is in the Chairs draft into something that we would nd more acceptable? Martin Butcher: It depends a little bit on what happens at the next PrepCom. The next PrepCom has three days set aside for procedural issues and two days set aside for substantive issues. If the procedural part does not enlarge to swallow the whole week, which it may do, we will have a couple of days debate. Up to now, the Chair has taken the view that anything that is raised by a solid number of countries gets added to the text and nothing gets taken away. We still have one last chance to throw some extra material in there. Roy Ibister: I think you are right; it is going to be very hard. To me, that makes it even more important that states such as the UK are stepping up to the plate now and speaking out for a very strong document. If they do not, there are some serious risks that things will not just not strengthen, but weaken signicantly. Q4 Mike Gapes: May I take that point further? We have had discussions since the election and the change of Administration, and also with the pending retirement of Ambassador John Duncan. We have highlighted this in previous sessions. I take it from the document that you have sent us that you are concerned about what you describe as a roll back of the UK position. How serious has that been, and is it one of the reasons why the Chairs draft is not stronger? Martin Butcher: On the roll back, from the public pronouncements of the Government, you would not necessarily know that there has been a roll back. The public statements that are made are good statements, but behind the scenes there has denitely been a decrease in activity. In the past two months, we have been extremely concerned that Jill Morris, who was head of counter-proliferation at the Foreign Ofce and the lead on ATT, has left that post for a temporary secondment to a more senior post in the Foreign Ofce. We were told at the time she left that she would be coming back in time to prepare for the next PrepCom, but in the past couple of days, we have been told that no decision has been made at the Foreign Ofce as to whether she will come back. The effect of that has been that there has been no senior civil servant at the FCO for the last two months coordinating work on the ATT. You can put that together with other meetings and discussions we have had with people in government. We know, for example, there is very little ministerial focus at BIS on the ATT. At the MOD, there is very little civil servant focus. Ministers have had actively to seek out briengs on the ATT to get any opinion out of their civil servants about what is happening. We have been concerned that, at this vital time, the

ship is somewhat rudderless, shall we say. Certainly if the UK, as a member of the P5that grouping is increasingly emphasised in negotiations as an important blochad been taking a very active lead in pushing the humanitarian goals that were set for the ATT back in 2006, it is entirely conceivable that progress would have been better, yes. Mike Gapes: We were told by Chair: Mike, this must be the last question. Q5 Mike Gapes: It will be the last one. We were told by Alistair Burt that there would be an equally high-powered successor to Ambassador John Duncan, but that has not happened. We are now told that we are taking our eye off the ball a little. Is the gap being lled by any other country? Are the Americans taking the lead now, or is there a problem, as you have hinted, that nobody is pushing the full, tough agenda that we need? Martin Butcher: America is certainly taking a lead in the negotiations now, but it is not necessarily the lead that we would like to see. The Americans have actively described wanting a treaty that is short and stripped down to the bare essentials, and that does not necessarily meet a lot of the goals that have been elaborated over the past years. Oliver Sprague: For example, the American version of the treaty probably will not have, if you understand their statements made on the oor of the UN, small arms ammunition in it. A treaty without ammunitionthe thing that kills most peoplein it seems extremely challenging and problematic. Will it actually save lives if it does not have ammunition in it? They want the treaty to have uffy, vague rules around the criteria. For example, in the current UK and EU system, and in the current Chairs draft, we have Thou shalt not authorise transfers where there is a risk that they will contribute to serious violations of human rights, undermine sustainable development, etc. The US and other Governments are very clear that they want to remove Thou shalt not authorise and change it to We shall take these things into consideration. What that means is that you are free to ignore them when you want to, so what you end up with is that arming serious human rights violators, war criminals etc. becomes optional, and that is something that we cannot support. Chair: Thank you. We have a lot of ground to cover in the time that we have for points that we want to put to you and on which you will want to respond to us, so if you could make your answers reasonably crisp, I would be grateful. We are going to move on to the Arab spring and Malcolm Bruce has some questions about that. Q6 Malcolm Bruce: We obviously discussed this before at the last session, and you were expressing your criticism of the fact that we had supplied arms to a number of countries. In your submission this time, you have repeated that, specically mentioning Bahrain, Egypt, Libya and Tunisia. You say While many export licences to these destinations were revoked when the uprisings began the UKWG believes that the licences should have been refused in

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the rst place. That is kind of history, but what about now? Are there places with which we are currently trading, considering trading or promoting trading that you would specically highlight as either inappropriate, or at least a cause for concern? Roy Ibister: It is a little tricky to know what is happening now with licensing policy in Arab spring countries because the data are falling behind a bit. We have anxieties that there is a willingness to go back to business as usual in the area, even though the Arab spring is far from over. Obviously, we have made the point in the past that licences to Saudi Arabia, for example, seem to carry on regardless of the situation in the country, and that is what we have seen over the last year, despite Saudi involvement in Yemen a couple of years ago and despite the Saudi support for the Bahrain regime. As we understand it, there is a small amount of protest going on in Saudi Arabia, but protest is illegal in Saudi Arabia, so it seems very hard for any kind of protest movement to gain a foothold. So, certainly there, I think, there is a problem, and it is going to be very interesting over the next three to six months to see what seems to be happening with the export licensing practice in the region, because there was certainly a dip to some of these countries, but we need to see if that is sustained. Q7 Malcolm Bruce: The Minister, as you remember, made a very bullish speech before the Arab spring erupted on us, and then rather qualied it afterwards. First of all, you indicated that you think that they might be going back to business as usual, even though it is not entirely clear where the regimes are heading, but you specically mention Saudi Arabia, and I think in your submission you express the view that wider considerations appear to be focused on Saudi Arabia. I am really trying to press you: do you actually believe that we should not be exporting small arms to Saudi Arabia? Is that your view as a group? Roy Ibister: I am a supporter of the notion of case-bycase licensing, so I would be loth to make a sweeping statement to say that there should never be small arms exported to Saudi Arabia. However, looking at the pattern of exports to Saudi Arabiathe scale and range of equipment that is sent, including small arms and light weapons, and the fact that there is virtually never a licence refusalif you match it against the prole of Saudi as a country, I just nd it very hard to believe that there should not be a little more restraint shown when it comes to Saudi Arabia, although I am not saying there should be an embargo on Saudi Arabia. Q8 Malcolm Bruce: I take the point, but I am actually pressing you on the case. You say you believe in a case-by-case statement. Do you believe, from your point of view, that there is a case to be made? Again, I quote the working group report: This leads UKWG to conclude that in the case of Saudi Arabia, other strategic, economic or political interests are deemed more important than transfer criteria relating to human rights, armed conict and international humanitarian law. I read that as an implication that you really dont believe we should be selling this kind

of equipment to Saudi Arabia, and you quote Saudi Arabias involvement in neighbouring Roy Ibister: As a general rule, I would say that I am convinced that there are cases where the sales have been ill-advised, but I do not have the information to locate to the individual transfer, so I can only look at the pattern, and the pattern is very disturbing. Oliver Sprague: We have raised, for exampleI think in two Committee evidence sessions nowthe role that the Saudi air force played in bombing northern Yemen, and we have been assured by the Government that, in their view, those attacks were proportionate and lawful, although at the same time they were telling us that they found it incredibly difcult to get on the ground to nd out exactly what went on. At the same time, we subsequently learned that the State Department gave a serious dressing down to the Saudi Arabian authorities on precisely this point, questioning them with satellite imagery and demanding answers about why they had indiscriminately bombed certain areas in violation of international law. So you have to ask why was it that the UK licensing authorities had a different view from the US about the conduct of those hostilities. It is striking to us that there have been no revocations at all of any export licences, including for ghter jets, when there does appear to be a case for looking at evidence of misuse as to Saudi, and when there have been a number of other revocations for other countries in the region such as Bahrain, Libya, Egypt, Tunisia etc. Q9 Mr Watts: Can we just say a few words about effectiveness? You are saying that in recent times there has been a dip of sales to some of these countries. Is there any evidence that that dip is affecting just us or our colleagues, or are countries nding a way round the system? Are they able to supply themselves regardless of what sanctions are put in place by the UK and its allies? Roy Ibister: I will have a stab at answering the rst half of that question at least. The UK is better than most in the timeliness of its reporting, but in most cases, at this early stage of 2012, we do not have any information in terms of ofcial statistics from other countries about what they exported or licensed for export in 2011. Those statistics will start to come through later in the year, so it is early days on that. Q10 Mr Watts: In the past, when sanctions have been applied, have they been effective? I am trying to get to the bottom of whether anything that has not got everyones support is likely to be effective. Oliver Sprague: Obviously, this is the general principle that underlies the moves for an arms trade treaty. The argument that if you do not sell the arms someone else will is given to us time and time again, and in one context it is sort of true, so you need to look at these things from an international point of view. But it is also important from a national point of view that the UK has obligations not to sell weapons where there is a clear risk that they will be used for serious violations of human rights law. That is a matter of law, and a matter of the right thing to do, so whether or not other countries choose to ignore these




things, that does not mean in any way that the UK is not obligated to follow through on that policy. Q11 Richard Burden: I would like to follow that, if possible, to get any views you have about the kind of risk assessment the UK does or does not do. You made the point in relation to Saudi Arabia that there was an instance of bombing. Somehow, a risk assessment has been done saying that, since then, there has been no substantial risk that would provoke any revocation. We have come across other cases where we have asked questions about the way particular arms exports from the UK, or which originate in the UK, have been used in other countries in ways that would be against the UKs consolidated criteria, and the Government have said, Oh yes, we agree with that, but, in the future, we will look at things on a case-by-case basis. It seems that we spend our entire time shutting the stable doors after the horses have bolted. Do you get any sense of how the risk assessments are done? Roy Ibister: Something that was revealed, or implied, by some of the statements that have come out from the Government since the Arab spring is that the evidence of past misuse plays too large a part in the Governments assessment process. Clearly, it is not an easy job, but the idea of looking at the risk of future use seems to be not signicant enough. If you look at the export review that has been carried out and at the Foreign Secretarys statements that have come out of the reporting on the review, they seem very much focused on what we do next time to shut the stable door as quickly as possible once the horses start bolting. Again, the idea of how you anticipate does not seem to be at the centre of concern. Certainly, where risk is not imminent, or is a little more difcult to calculate, it feels as if the Government struggle with that. I think more work needs to be done on that. Oliver Sprague: If you look at their response to the Arab spring and the review of export licencesas regards the actual details of what they are going to do; I take the security and justice assistance paper on boardthere are substantial areas that they have identied and agreed need looking at. One is risk assessment and whether we need a new, enhanced risk assessment. The second is around end-use monitoring and whether we need to improve that. There is a commitment to increase transparency further. All these thingsthe involvement of greater ministerial oversight in the process, including on open licences are important. All these things suggest to me that there is an acceptance that, in certain places, they have got that risk assessment wrong. I would echo what Roy says: far too often, we get answers that say there is no evidence of the use of British equipment. That is not the question that should be asked. The question in the criteria is about evidence of equipment of this kind or any kind, so the fact that tear gas has been used in these countries means that tear gas should be on the list of very problematic equipment to be selling. That is only one factor. The evidence of previous misuse is only one of many factors, and I would argue that you need to look at the capacity of the end user to apply the norms and the rulesfor example, the UN rules on policing, the various human rights instruments on accountability, how those units and armed forces are

managed properly, and what is their capacity to apply the rules. If you ask that question in the context of somewhere like Libya, you come up virtually every time with the answer nono, these should not be sold weapons because they do not have the capacity to use them properly. Q12 Chair: You have come on to what is going to be our next topic: the Governments arms export policy review in the context of the Arab spring, and in relation to the countries in North Africa and the Middle East. There are two questions I want particularly to put to you. First, there is a distinct lack of clarity to the Committees as to how extensive this review was within Governmentthe Secretary of State is coming before us shortly, so we will be able to put questions to him on thatbut there was even more obscurity to us as to how far bodies outside the Government were involved. Can you tell us briey what your NGOs degree of involvement was in the review? Roy Ibister: Minimal. We had one meeting when we were given some information about what the Foreign Ofce had been thinking during the rst stage of the review. It was just as it was about to put its views to Ministers, and that was it. Q13 Chair: Was the meeting at the Governments initiative or at your own? Martin Butcher: We had been requesting consultation meetings for some timerequests that were not met. I cannot remember whether the FCO then asked us to come in for a brieng. Q14 Chair: So the totality of your involvement was one meeting, which you were probably responsible for pressing for. Roy Ibister: I think it was probably that we were asking if there was going to be a consultation process as there was previously with the review of the Export Control Act a couple of years back, which we think was a very good model of us, the industry and the Government working together. It is hard to remember exactly, but I have a feeling that it might have been that, instead of consultation, the Government offered to have us in to give us a bit of a run through what they had been coming up with. Oliver Sprague: We also had a letter, or more than one letter, that said that there would be a round tablewith us and the industry, I assumedabout the thinking and the outcome of the review, but that didnt happen either. Q15 Chair: Thank you. I come to my second question. The facts clearly demonstrate that this is the area, certainly numerically, of the biggest single misjudgment as to the degree of risk in selling particular weapons, ammunition, etc. to particular countries when there was a risk that they could be used for internal repression. This is, numerically, the biggest single misjudgment that has been made since the creation of the modern export licensing system, given the fact that this has resulted in the revocation of 160 arms export licences that are extant. That is unprecedented in the modern export




licensing system. Those are the gures and the details that we have put together as the Committees for licences granted from 1 January 2009. The question I wish to put to you is: given that background, how condent or not are you from the Foreign Secretarys response as to the outcome of the Governments export policy review that misjudgments on that scale will never happen again? Roy Ibister: I would say that I do not have condence that they will not happen again. I would imagine that things will be a bit tighter. After something goes wrong, things get a bit tighter. What tends to happen is that as time goes on, if nothing terribly bad happens, the relaxation sets in. Unless the system changes, there is always the risk that something will go wrong again in the future. I have no particular reason to say when or where that should be, but that is certainly a risk unless you change the way you operate. Martin Butcher: I would agree with that. Chair: We will move on now to the issue of the licences that have been revoked. Ann Clwyd will lead on this one. Q16 Ann Clwyd: It is many years since I was last on this Committee, but it seems to me that I am hearing exactly the same things that I heard 10 years ago when we had the same arguments and excuses. It appears that the very existence of the Committee is an enormous con. It is conning Parliament and the public because the Government will do exactly what they want. If they want to sell to repressive regimes, there is very little that we can do to stop them. You talked about breaking the law. If you think that the Government are breaking the law, what action can be taken against them? You are NGOs. What action will NGOs be able to take against the Government? Oliver Sprague: There is always recourse to things such as judicial review. They are not always successful, but they have been successful in a number of export control matters going back through the years. I remember many years ago the Pergau Dam issue. Very recently, the Government lost the case on whether there should be an order to control death penalty drugs to the United States, so there are these remedies that can be pursued. This is where I could interject with something, if I may. Something rather important happened last week of which the Committees need to be aware. A very important brokering and trafcking case collapsed in the courts and it is now going to the Court of Appeal to test the judgment. It appears to have been thrown out Q17 Chair: Mr Sprague, can you name the parties to help the Committees? Oliver Sprague: Yes, it was Gary Hyde over a trafcking and brokering case to supply 40,000 AK47 ries from China to Nigeria. My understanding of that particular case is that it is now subject to review because the judge has ordered that the defence was made Q18 Chair: I am sorry, but I have just been advised that you may be starting to encroach on the sub judice rule, so I do not think that we will go into any details

on that particular case. Could you please discontinue with that? Oliver Sprague: Okay. May I say, without going into specic details, that you may want to check the wording of the brokering and trafcking legislation, and what it covers and does not cover, because that is the centre of the appeal? If it does fall, there are implications for the wording of the legislation that we have all helped to generate. I will leave it there. Q19 Ann Clwyd: I am sorry to have put you in that position. There are a very large number of licensed revocations this time, which suggests that the whole licensing system is fundamentally awed, which you have already touched on. Do you agree that there is a fundamental aw and what is it? If there is one, how can it be rectied? Oliver Sprague: The answer to the revocations is a yes and no. I know that that is an unhelpful argument. The fact that the Government are able to revoke a licence when things that were unforeseen go wrong is a helpful thing in an export control system. The fact that they have had to revoke so many indicates a problem with the initial licensing. For the reasons that we have outlined in a previous argument, the way they have applied risk and the way, maybe, other political, strategic and economic factors have come into the licensing decision process have meant that, in some instances, they have got those judgments wrong. Roy Ibister: I suppose there does seem to be a aw whether it is fundamental, I do not know. But maybe I could start with another positive statement. The fact that this brokering case was actually in the courts was because there are now laws on brokering in the UK that did not used to exist, and there have been other prosecutions. That is an example of where there has been positive change to the UK system, and we welcome that. But in terms of the aw, it has to be recognised that the system is going to require judgment, and there will be occasions when bad judgments are made. Two different people with the same facts in front of them, operating in good faith, can come to different conclusionsthat is certainly something that can happen. I suppose it is the scale of this that suggests that something bigger has gone wrong here. The way that the system seems to work is that a licence will be granted unless there is a reason it should not be grantedif you cannot give me a good enough reason why I cannot award this licence, it is going through. There are a number of countries out therethey have not reached the point at which it would be appropriate to subject them to embargothat are particularly sensitive. It would be helpful if the thinking behind licensing ipped so that licences would be refused unless you could give a reason why they should be grantedthings like the fact that they meet a clear and legitimate defence need. I am also thinking of some of Ollies lines about having condence in the capacity of the recipient to follow their obligations under international law. If there could be that kind of change, it would be interesting to see where that took us.




Q20 Ann Clwyd: Should we therefore be revoking licences to Saudi Arabia, given its human rights abuse record? Should we be willing to sell them more arms? Roy Ibister: I would personally probably put Saudi Arabia in the category where there are a number of problems that make it a problematic destination, to the point where licences should be considered on the basis that I was suggesting and you start off from the point of view that we are not going to issue the licence unless they can justify why an exception should be made. Oliver Sprague: It is important to add that in the review there is hope of putting in a new process that is a halfway house; they want to introduce a new suspension clause into the licensing so that as soon as trouble happens, you can suspend a licence, rather than formally revoking it. I guess our concern with that is that it may not apply to the shipping, transport etc., and that it only refers to the licence processing. If you are going to suspend something, make sure you are suspending everything so you do not have shipments on the dockside waiting to go. You should also suspend those. The other thing I would say is that this is why improvements in reporting become even more important. For all these things, there are basic answers we and the Committee want to know, such as who is the end user, what is the exact nature of the equipment and how will it be used? We still do not have that in our reports. There were reports in the press last week of more arms and military export licences going to Bahrain and Egypt, but without the context to explain what exactly this equipment is, it is almost impossible for us to analyse these things, other than in a critical way. Q21 Ann Clwyd: Finally, some of us remember the arms to Iraq inquirythe Scott inquiry. Have we learned anything since then? Could there be another inquiry similar to the Scott inquiryon the Arab spring, for example? Martin Butcher: To take one case, say Libya where the political considerations seem to be at least in some way similar. In the 1980s, Iraq was considered to be an important ally, a bulwark for security in the region. Post the thaw in relations with Gadda, it was considered necessary to bring Libya into the international community. It does seem that similar kinds of wishful thinking went on in terms of the nature of the regime and the way it would act and those pigeons came home to roost. At this point, there is nothing to say that that will not happen again somewhere else. Chair: We will move on now to the issue of the consolidated criteria. Penny Mordaunt will lead for us. Q22 Penny Mordaunt: What changes, if any, would you want to see to the consolidated criteria? Oliver Sprague: Most importantly, the current EU common position is supposed to be reected in UK law and it is not because the UK still uses the common criteria. The common criteria are different from the EU code in a number of important respects. Both say that you should not issue an export licence where there is a clear risk that the items will be used for

serious human rights violations. Where they are different is that under the consolidated criteria, the Government only have to take into account things such as international humanitarian law. Under the common position, they have to deny an export licence where there is a clear risk that the items will be used against international law, so there is a take into account versus a thou shalt not. There is also an exemption in criterion 2, or a difference in the UK consolidated criteria, that says it is okay for weapons to go for internal security uses to preserve law and order against, for example, acts of terrorism and so on. Obviously, it is qualied and justied, but that permissive language is not reected in the common position. I guess the last one that may be relevant to the case on Saudi is that the phrase that is used in the consolidated criteria is that full weight should be given to the UKs national interests. Full weight seems to imply something that is important in its signicance. In the common position, it is a much lower, states shall consider this. It does not use the language, full weight. In those three or four areas, there is a difference and there should not be. It says in the Export Control Act 2002 that the Government should issue guidance, so it should be fairly straightforward to replace the EU rules that we have all agreed to with the consolidated criteria that were introduced in 1997. Q23 Penny Mordaunt: Anything further to add? Roy Ibister: There are a couple of areas. Corruption is probably under- described in the criteria and it would be useful if that could be elaborated on. I would also like to see some kind of reference to governance. Exactly how that would work I am not entirely sure, but I think that a lot of work has been done on governance since the criteria were agreed. The language in the criteria is almost 20 years old. It stems from about 92. There has been a lot of development on managing fragile and conict-affected states, so bringing in some kind of governance aspect into the criteria could be useful. So those are a couple of other ideas. Chair: We are now going on to the recent trade exhibition. Q24 Ann McKechin: Just a specic question for you, Oliver. I know that Amnesty and a number of NGOs have been critical of these trade fairs and of the fact that you appear to be the ones who are policing the stalls and nding the literature that the authorities cannot seem to nd themselves. What do you think DSEi and the Government should be doing to improve the scrutiny of these types of trade fairs? Oliver Sprague: I was doing a bit of checking on this particular issue. Since new laws were introduced lets be fair and say in 2004, when some of the torture equipment, the brokering and trafcking stuff came inthere have been companies advertising stuff in apparent contravention of those laws at every fair since. I could provide you with a list of all the companies. All those have been found either by civil society groups like ourselves, investigative journalists, or, in the case of the cluster munitions this year, a Member of Parliament. The Committees in the past




have made a number of recommendations about the need for the authorities, because they are there in great numbers at the fair, to take policing and enforcement more seriously. It is still a problem. It has been a problem since 2004 and it is still a problem now. Q25 Ann McKechin: Is it improving to any extent? Oliver Sprague: I would say that it is worse. I would say that what happened this yearit was me that raised the issue of the Pakistan Ordnance Factories having cluster munitions in its general product literature in 2009. This year it came back with a specic brochure with it on. It not only repeated the offence, but repeated it worse. Roy Ibister: You have to say, whose is the rst stall that you are going to go to, if you are checking this stuff and if you are responsible for this kind of thing? Oliver Sprague: And the company that was doing the torture equipment was displaying brochures from another company, to be fair, but that brochure was all over the top of its stall. It had a double-page spread of leg irons, gang chains and belly chains. They may have been called something slightly different, but it was pretty obvious what they were. Anyone who is aware of the UKs prohibition, back from 1997, on these kinds of goods, should have thought, Doublepage spread? I dont think that that should be on the stall. It was groups such as Amnesty that found that; it was not the people policing the fair. Q26 Ann McKechin: Are you aware of any incident where the authorities have found literature and have then prohibited exhibitors? Oliver Sprague: I am not aware of that, but it does not mean that they have never done it. Ann McKechin: You are not aware of that. Thank you very much. Q27 Chair: When you said that you thought that the position had got worse, do you attribute that in any way to Government policy or do you attribute it simply to administrative incompetence? Oliver Sprague: I certainly do not think that it is Government policy to allow companies to exhibit torture equipment or cluster bombs. It is very clear from Government policy and cross-party support that these things are banned, illegal and should not be there. There is clearly a problem with the enforcement, policing and subsequent action that they are taking against transgressors, because they are doing it again, and it is not getting better. Roy Ibister: May I add very briey that where the policy seems to kick in is what happens after something is found? I can believe that it is just an administrative bungle if it is happening in the rst place, but we have cases here where the law has been broken and there is documentary evidence that the law has been broken. As far as we are aware, there has never been a prosecution on the basis of this. Maybe if the Government policy got a little more active on prosecution for the next DSEi, it would make exhibitors a little more cautious about what they are willing to display.

Q28 Chair: Just on that, you will acknowledge that, mercifully in this free, democratic country, it is not the politicians who decide on prosecutions. It is the Crown Prosecution Service. Oliver Sprague: Certainly, if I was the organiser of a trade fair and two times in a row a large manufacturer brought material on cluster munitions, I would want that company to not be allowed to show its products at the subsequent one. Chair: That happily brings us to our next subject, which is cluster munitions. Q29 John Glen: Given the Europe Ministers reiteration of the Governments desire to see a global ban on cluster munitions on 9 November in the House of Commons and the defeat of the attempt to weaken the controls in place at the conference in Geneva, can you say how you feel about the Governments position as taken in Geneva and whether you agree with it? Martin Butcher: We were very pleased in the end with the position that the Government took at the CCW on the proposed protocol 6, covering cluster munitions. We felt that the adoption of protocol 6 would have weakened the international law in this area, so we were very pleased that the Government stood up strongly for the cluster munitions ban and for that principle that these weapons should not be used. Also, at the Commonwealth Heads of Government meeting there was a promotion of the cluster munitions convention by the Government to other members of the Commonwealth, so we were very pleased with that. There is a cautionary tale, which preceded that good news, which I might apply also to the arms trade treaty for the coming months. Ministers came very late to take a position on protocol 6. Until the point when Ministers made a political decision that they were not going to support it, the assumption had been by civil servants that the Government would support it, because the Americans were asking for that support. Q30 John Glen: Given that they did not, what material difference does that make? Martin Butcher: We have no evidence at the moment that it makes a material difference, for example in the ATT negotiations or that it made a difference for the CCW. However, we would say that it does show that it might be better for Ministers to take a very active role in giving political guidance across Departments for example, on the ATTearly. Q31 John Glen: Even though they secured the outcome that you recognise as being the right one and that they stood up against the Americans in the end, you felt that their tactics prior to taking a position were not robust enough? Martin Butcher: It was not that the Governments tactics were not robust enough; it is just that civil servants, without guidance, were going along doing what they thought the Government wanted, when actually the Government wanted something completely different. In the case of the ATT, it would be great if, as we discussed earlier, more robust political guidance were given early and often, rather




than leaving it all to the last minute. In this case, it worked. It would not necessarily in the future in other forums. Q32 John Glen: Oliver and Roy, is there anything else you want to say? Roy Ibister: What happened with the clusters puts the UK in an interesting position in terms of the ATT. There was a bit of bad blood going on among the delegates when this was happening and, in a way, the UK has ended up sort of in the middle of that. I just wonder whether, if that bad blood carries over into the next negotiation, which will be for the ATT, the UK may nd itself in a potentially bridge-building position of having almost had a foot in both camps, if you like. Again, I would hope that the UK might look at how it could take advantage of that through the ATT negotiations. Q33 John Glen: I think I am right in saying that, in the past, you have expressed some concern about the indirect nancing of the production of cluster munitions. Could you set out your views on the present Governments position, how it is different from the previous Governments and what your precise concerns are on that? Oliver Sprague: As we are short of time, I will not go into why indirect nancing is a problem, other than to make the basic point that that is how the nancing of cluster bombs takes place. Largely, it takes place through indirect nancingloans that you give to the producers of cluster bombs and other munitions. When the Cluster Munitions (Prohibitions) Bill was going through Parliament last year, the Opposition now the Governmentintroduced a specic amendment in the Lords to put indirect nance into the Bill. They withdrew that amendment, I assume because they were satised with the previous Governments assertion that it would work with industry, with civil society and with the Government to develop a code of conduct or robust guidelines aimed at ending indirect nance, with a view to legislating if that process was not successful. From my discussions with a number of high street banks and nanciers who are caught up in this loophole, they are looking to the Government to start that process. It is my understanding that the Government have decided, for whatever reason, not to pursue that process. I think it would be very helpful if they were to do so. I am at a loss to know why they havent, because they certainly havent engaged with any of the banking or nancial sectors working on cluster munitions or cluster munitions issues. Q34 Chris White: My question is to ask whether you have received any information about the EU Commissions examination of the regulations on torture end-use controls, noting that we were told that this would take place in November at the end of last year. Oliver Sprague: There is actually some very good news here, and some news that we are not clear about. There has been a change. Just last week, BIS introduced a new notice to exporters that now makes death penalty drugs subject to export licensing. It has

amended the regulation to include death penalty drugs, so we should all be very thankful and supportive of that work. It has also banned sting sticks and hand-applied electric shock devices, such as electric shock belts and spiked batons, and put them in the regulation. The interesting thing is that the Government make great play of the fact that that followed national action by the UK, which already puts sting sticks and handapplied electro-shock weaponry in its national regulations. As I understand it, there has been no formal movement on the end-use provision. Remember that it is wider than just the death penalty; it is about torture, cruel and degrading treatment, and the death penalty. It is a catch-all clause that says that if you are aware that your products will facilitate those prohibited acts, you need to seek a licence to do that trade. We have often argued that if traction is not forthcoming at EU level, and given that it has been a commitment of the UK Government since 2008 to do so, they should introduce it nationally. I think the very fact that national action in the UK on sting sticks and electro-shock devices has had an impact in inuencing the EU position on these things is reason to do it. Q35 Chair: I am going to nish with what is a key policy question before the Committee. I want to read out the very clear policy statement made by the Foreign Ofcer Minister, Alistair Burt, on 18 February in which he summarised the present Governments policy on the licensing of arms that could be used for internal repression. I also want to read out what Peter Hain said when the last Government announced the consolidated criteria in a written answer on 26 October 2000. Alistair Burt said, and I believe that it absolutely correctly reected the position of the previous Government, that the longstanding British position is clear. We will not issue licences where we judge there is a clear risk that the proposed export might provoke or prolong regional or internal conicts,this is criticalor which might be used to facilitate internal repression. In other words, the policy had two legs the clear risk threshold, and also which might be used to facilitate internal repression. That I believed absolutely correctly reected what Peter Hain had said on 26 October 2000 when, before he listed the criteriaas you know, it includes a very clear statement about the clear riskit is prefaced by this wording: An export licence will not be issued if the arguments for doing so are outweighed by the need to comply with the UKs international obligations and commitmentsthis is the crucial wordingor by concern that the goods might be used for internal repression or international aggression, or by the risks to regional stability, or other considerations as described in these criteria. Both Ministers and both Governments made it clear that there is the clear risk threshold, and there is the might-be-used-for-internal-repression threshold. My question is: do you believe, notwithstanding what Alistair Burt said on 18 February, that the Government are changing the policy and resting on clear risk only? Oliver Sprague: I guess we go back to what we said in our previous answers. We think there is a genuine




problem with the word evidence. We think that they have been interpreting too often clear risk to mean evidence. It does not mean evidence, it means clear risk. Evidence is one thing out of many that you would look to. It is the implementation and interpretation of the policy that may be at fault here. Roy Ibister: It is difcult; those two clauses put together. I tried to write them down so I could get them right. If those two clauses put together are interpreted in the way that I would interpret them that creates a very high threshold. There are any number of ways of interpreting those words: goods might be used for internal repression. In a way, you could say that there is always a risk that a good could be used for internal repression. Therefore, that they might be used can apply in every circumstance. People interpreting this are going to struggle with that. It is the clear risk side of it that gives something

chunkier that can be used, that should be easier for Governments and decision makers to use. The might be used is potentially vague to the point where it becomes easy to cast it to one side. I dont know that; it is just my supposition. I worry that the language is a bit too vague to be useful when it comes to a decisionmaking process. Martin Butcher: I would just add that in the case of Libya, we have all been at meetings where we have said that there might be a risk that equipment would be used for the wrong purposes. The phrase has constantly come back to us that there is no evidence that British equipment has been misused. It is a reliance on what has gone on in the past, as we have said in evidence before. Chair: Mr Ibister, Mr Sprague and Mr Butcher, thank you all very much indeed. It has been most helpful; we are grateful to you.

Examination of Witnesses Witnesses: David Hayes, Chairman of EGAD, David Hayes Export Controls, Bernadette Peers, Compliance Manager, Strategic Shipping Company Ltd, Brinley Salzmann, Secretary of EGAD, ADS Group Ltd, and Barry Fletcher, Executive Committee Member of EGAD, Fletcher International Export Consultancy, gave evidence. Chair: Mr Hayes, Ms Peers, Mr Salzmann and Mr Fletcher, thank you for coming to the Committees. We have a number of issues we want to raise with you. We want to start with the arms trade treaty. Q36 Mike Gapes: As you heard the previous questions, I am not going to repeat them. However, at the point we are at now, assuming that the arms trade treaty is broadly in line with the draft that is under consideration, do you think it will be benecial to law-abiding, responsible arms exporters, or do think there could be any adverse consequences for your member companies? Brinley Salzmann: Our perception of the draft treaty as it currently stands is that, while there is still a lot of work to be done to nalise it, we do not see anything that would necessarily inhibit the activities of legitimate and responsible companies. We are not quite sure how effective it is going to be against the illicit arms dealers out there, but we want it to be as robust as possible, effective and able to be implemented. Part of that implementation process is for nations that have effective export controls in place to provide a helping hand to those countries that do not have such effective systems so that they can bring them up to speed on how to go about it. Q37 Chair: On the Governments review of the arms export policy in the context of North Africa and the Middle East, which is where it came from, will you give us your views as to the adequacy or otherwise of the outcome of that review, as reported in the Foreign Secretarys written statement? Brinley Salzmann: When the policy review was announced back in February, we made occasional approaches to the Foreign and Commonwealth Ofce to see when both industry and the NGOs were going to be brought into the fold as part of the consultation process. At the end of the day, we did not have any input into the policy review at all. We are waiting to have a meeting with the Foreign and Commonwealth Ofce so that we can have a greater understanding about the implementation of the new policy because we are coming across companies that are looking at potential business opportunities in the Middle East and North Africa, and they do not know whether to go for them because they do not know whether the British Government will approve them. Therefore, there is an information vacuum, and I have heard of a case where a British company thought that there was a blanket prohibition on exporting anything to the Middle East and North Africa and as a result was thinking of walking away from a potential business opportunity for the supply of some innocuous equipment to Oman. Therefore, we are trying to work with the Foreign and Commonwealth Ofce to get a brieng so that we have a better understanding of what the implementation actually means and so that British companies can interpret for themselves what the new policy is. David Hayes: It is very easy, with the benet of 20:20 hindsight, to look at licensing decisions that were made in the period that is covered by the review and to criticise those decisions as being in some way defective without giving adequate weight to the fact that the decisions were made on the basis of the information that was available to the licensing authority and the advisers at the time. If we are talking about a standard individual licence, licences typically have a two-year life and a lot can happen in two years. The decision may well have been valid based on the criteria at the time, and to look at the decision itself as being defective, merely because the situation changed, is perhaps not the right perception.



23 January 2012 David Hayes, Bernadette Peers, Brinley Salzmann and Barry Fletcher

Q38 Chair: We have just heard from the NGOs that, following requests that they put to the Government, they got a meeting with ofcials before the review was concluded. From what you have just been saying to us, are we right in supposing that, in fact, you made no request to the Government for a meeting with them before the review was concluded, and that you certainly got no offer of a meeting with Government ofcials before the review was concluded? Brinley Salzmann: No, we did not have any meetings with Government ofcials before the review was concluded. We are now trying to catch up by trying to set a date for a meeting where we can be briefed on the outcome of the policy and its implementation. Q39 Chair: Do you think that you should have been asked by the Government for a meeting before they reached their conclusions? Brinley Salzmann: In the spirit of the consultation regarding the Export Control Act, we thought that it would be common sense for both the industry and the NGOs to be brought into the fold and to be part of the consultation process. We were unpleasantly surprised by the fact that we were not brought into the process at all and that we had to wait for the result of the review to be announced. Barry Fletcher: I think that it would have been sensible for them to have had words with us. Q40 Malcolm Bruce: Just picking up on the point made by Mr Hayes, is not the crux of the problem of what has happened over the last 18 months to do with getting a balance between what might happen and what does happen and, indeed, about how you approach a regime to which you might be selling arms? It is a little bit about the question that Richard Burden was asking about risk assessment. To put it crudely, if you are in the business of selling arms, you want the biggest possible market but, on the other hand, you do not want things to come back to bite you. Given that the Government are not consulting you, do you get the fact that the Governments difculty is actually being prepared to saythis is a political difcultyWe just dont think we should deal with this regime because there are too many uncertainties? That creates a political context that makes it almost impossible to get a regime that actually works in anything other than retrospectin other words, it does not work until the situation blows up in your face. David Hayes: Yes, that is a fair description. It is an unenviable task to look at a licence decision that is going to have a life of two years, unless the licence is revoked, and to try to satisfy yourself that you have considered all possible scenarios that could develop over the course of the life of that licence. Q41 Malcolm Bruce: Does not that ultimately mean that an awful lot of these decisions will be political and based on a given Governments political philosophy and also their foreign policy judgments at any given time? David Hayes: Inevitably so, yes.

Q42 Malcolm Bruce: What we are trying to nd out is whether there is an objective test you can apply that gets beyond just the political. David Hayes: I do not think there is, which is one of the reasons why we have consistently opposed the idea of privatising the actual export licensing function. The export licensing function is inherently political and is therefore in the province of the Government. Barry Fletcher: I am in quite a good position to be able to make a comment on this, as an ex-adviser on whether export licences should be issued when I was working for the Government. You are faced with an extremely difcult situation on a day-to-day basis, with hundreds of applications in front of yousome are a lot easier than othersand with the facts as you have them at the time. I know that there has been talk about risk, but most advisers have to work on the factsit cannot be on hearsay or on what you have read in the press; it has to be on the information you have. You are putting forward just one opinion on whether you think the ECO should or should not issue a particular licence. I would invite every one of you to be put in that position just for one day to see how difcult it is. There are bound to be mistakes, and I applaud the Government for having taken retrospective action with these licences. I think that is far better, because those decisions that a licence should be issued were taken at the time, and immediately when the situation changed, the Government did what I think they should be applauded forthey did something about it. It does not matter what the policy is or whatever the guidance is. When it comes to actual decisions, unless you want to hold up every licence application for six months, there probably is not an easy answer to making the right decision every time. David Hayes: You touched earlier on whether things are improving. The situation in relation to the Arab spring was certainly a vast improvement on the situation when India and Pakistan were in danger of severe conict many years ago. Certain export licences were revoked then and certain ones were not. They were not even revokedwhen licences expired, they were not renewedso whether or not you had a licence to export your equipment to a given country at that time was purely and simply a function of the renewal date of your licence. This time, the Government took a quite clear decision that all licences to those countries that were of concern would be reviewed and revoked where necessary; they did not simply rely on what was effectively a random number. Barry Fletcher: If I may also make another point, there was mention by the NGOs of the number of refusals. Do not ever get misled that a refusal is always of a licence application. There is the F680 approval system, which gives people prior advice on whether they are likely to get a licence. This is used extensively by manufacturers of military equipment. Therefore, it is not unusual, having got the advice that there is no way that they are going to get a licence, for them never to apply for one. Q43 Ann Clwyd: Mr Fletcher, you explained the difculties of making decisions on licences. Can I ask




how good your intelligence was? Where did it come from? Barry Fletcher: Yes, you may ask. Various sources. I am still subject to the Ofcial Secrets Act, even though I have retired from the civil service. Chair: This is a public meeting and you are right to reect that. We come now to the export control system and the ECO. Ann McKechin is going to lead off. Q44 Ann McKechin: Your organisation has been critical of the bureaucracy that your members encounter. You mentioned the very low number of refusals, although I was interested to hear Mr Fletchers analysis that there is actually a preprocedure, which is likely to take a lot of them out. In your submission, you call for a review of the control system. What outcome would you like to see if such a review occurred? How would the system operate in a way that allowed effective control of some of the problems we have been talking about today while reducing the regulatory burden? David Hayes: The key has to be that the Government take a more risk-based approach to export licensing. If we are in a situation where a high 90% of standard individual licences are still being approved, within that high 90% of the total licence population, there have to be a lot more exports that could, with very little additional risk, be made under open licensing. Q45 Ann McKechin: Could you give us some indication of what type of applications those would be, or which countries would be involved? David Hayes: That is very difcult. To give you an example, a licence was issued in October 2010the OGEL (Military Goods). There was an OGEL available before, which was called the OGEL (Military Goods: Government or NATO End-Use), but a lot of exports were being made, particularly among multinational companies in the EU, that were going, for example, out of the UK to a partner company in the EU for some processing to be carried out, before coming back into the UK and subsequently being built into a nished product, which would be exported again, subject to UK licensing. You could not use the previous OGEL because the requirement was that the end user be a Government or NATO. The decision was taken that there was a group of countries where our acceptance of their export control systems was such that we did not actually have to insist that the end user in that country be a Government. We need to look at other classes of exports that fall within those sorts of criteria. Q46 Ann McKechin: Are there any other changes that could happen to this system? Bernadette Peers: Enforcement could certainly be improved. There is a better way of enforcing than just having a compliance ofceror inspector nowgo to the company and audit the paper records. If any export is going outside the EU, a customs entry has to be made and data regarding the export licence have to go into a certain box so that customs can see at export what is going where and can collect data to check on whether it is a legal export and what licence has been applied for. That could satisfy the NGOs,

and it would give the compliance unit better scope to target the non-compliant companies, as opposed to going after the compliant companies that are making the correct records and entering the data. So, we should have bigger fences around the more sensitive equipment perhaps, and we should target enforcement much better than we are at the moment. David Hayes: There is another issue of concern around enforcement. We are aware of companies members of our organisationthat have spent considerable sums on export compliance and made voluntary disclosures to HM Revenue and Customs when they themselves have discovered errorswe are not talking about egregious errors here. We are seeing situations where these companies, which are going forward with voluntary disclosures of things they themselves are picking up, are being hit with quite signicant compound penalties, yet other companies out there, which might fairly be described as recidivist, just get warning letter after warning letter after warning letter. We are not in possession of all the facts. We have to assume that Revenue and Customs Prosecutions Ofce is in possession of the facts. Looking at it from our perspective, that does seem rather odd. It is also getting to the stage where it could be viewed as a disincentive to companies to come forward with disclosures. Barry Fletcher: In most cases, you have to realise that the voluntary disclosure that are made would not be picked up by a compliance inspection because they are so deep in the paperwork and often of a technical nature. They are being completely honest. Q47 Ann McKechin: Do you think that the expertise and capacity of the current staff who deal with enforcement are better or worse than they were ve years ago? David Hayes: The capacity is certainly worse, but that is true of the whole of Government in view of the current nancial situation. Barry Fletcher: They are doing their best in a very difcult situation. Q48 Ann McKechin: In terms of their judgment and of how they react to contraventions of the rules, you seem to suggest that if some are placed in front of them by voluntary disclosure, it is much easier to say that that needs a target. Barry Fletcher: You must appreciate that the length of time that a compliance ofcer is with a company is a matter of hours. To nd most of these voluntary disclosures takes weeks of work, going through every single piece of paper and looking against the criteria on the licence that is being used. It is not usually that there has been exporting without a licence. In most cases, the wrong licence has been used or something of that nature. That is so complicated. They could hide those facts and they would never come to light unless Customs went in and did a complete and utter investigation of the company. They are trying to do their best by saying, We are doing a complete audit of our company and this is what we have found. Bernadette Peers: Customs enforcement has increased slightly at the airports. We have seen more shipments being stopped and examined than we were




seeing ve years ago, so that is certainly happening, but I do not think that we are seeing more prosecutions. We are in the business of trying to make our companies compliant, so it would back up and reinforce our message if Government also said, We are going to take this seriously, and have some prosecutions, civil penalties or warning letters. Q49 Chair: Ann, I am very sorry but because Katy has just temporarily left us, we are not quorate. I will just carry on if I may, and hopefully anticipate the question that you might have been putting. What is your view on the invitation or the consideration that the Government are giving that the industry should nance the Export Control Organisation? David Hayes: We can see the situation that the Export Control Organisation is in, and we recognise the problems that it has, but the way that the charging was originally being considered, before it was recently shelved, was quite simply unworkable for a number of reasons. First, the sorts of gures that were being bandied about were 300 per standard individual export licence and 3,000 per open individual export licence. Unfortunately, there is no correlation between the value of a product and its export control status, so it is perfectly possible to need a 300 export licence for a 10 widget. The economics of that just do not make sense. Companies would simply source their products elsewhere. It would drive the manufacturing of that type of product out of the UK because manufacturing in the UK would quite simply not be viable. Companies in the dual-use sectornot the military sectorcould arrange their affairs so that they quite simply applied for their licences in another EU member state. Provided their goods are controlled in annexe 1, the export licence is a community licence, so the licence can be applied for in Italy or the Czech Republic when the goods are actually being physically exported from the UK. It was not particularly well thought out in terms of the impact or the feasibility. Bernadette Peers: A source of revenue, to come back to the Customs entry, is to ne the agent or the exporter for making a false entry, or an incorrect entry, and then you have a source of revenue that could come back to Government to help funding. It would improve enforcement. It would improve agents behaviour, which is not very good, on behalf of their exporters. It is a source of funds to Government to assist them to recruit more staff. David Hayes: We put a paper with estimated income in to the Committee some time ago. It was on the premise that the Export Control Organisation would be an agency, but regardless of whether the ECO is an agency or not, the argument remains valid. Conceptually, the advantage of such a system is that, by denition, charging for licences only catches that population of companies that are already compliant. They are already on the Governments radar and already applying for licences. The rogue companies out there that are operating below the radar would make sure that they stayed there, and get even lower. They would avoid the cost of compliance altogether and enjoy an increased competitive advantage over the companies that were complying.

Q50 Chair: Am I right in deducing from what you are saying that there is complete unanimity within EGAD that you do not want the Government to introduce a charging system? Or might there possibly be those within your membership who are saying, on the basis of he who pays the piper calls the tune, that if the ECO became dependent on the industrys funding, it might be more pliant to the industrys wishes. David Hayes: I would like to think that we lack members who would be so naive. Barry Fletcher: There was derision even within the executive committee of EGAD when it was initially voiced that it might come in, but they were under a misapprehension that we were going to be given a better service, and therefore there would be more people employed. When we were told no, it would be exactly the same number of people, and then there was an argument about how they would probably have to have three or four people just looking after the money side of things, and therefore there were going to be fewer people handling licensing issues , they changed their views quite quickly. Q51 Ann McKechin: Thank you, Chair, for lling in so competently. If you look at the Governments annual report, there is a clear deteriorating trend in the last few years in the percentage of SIELs processed within the 20 working days limit, and the 60 working days, and also for appeals, but there also appear to be substantially more applications. The gures show that in 2007 the number nalised was 9,647, but in 2010 that increased to 16,723. Could you give me your thoughts about the cause of the deterioration in processing, what remedy you would suggest, and perhaps relate that to the fact that we seem to be having, year on year, an increase in the number of applications. David Hayes: A number of factors are in play. It would be nice to think that part of the increase in licence applications is increased awareness, and that more people who should be applying for licences are applying. There is the problem that we have already spoken about, which is the large percentage of licence applications that really should not be licence applications at all and should be under some form of open licensing. Companies that either cant or wont, because of a lack of condence in their ability to use these licences, go down that road and use them. There are stafng reductions. Obviously, the ECO is a lot smaller now than it once was. For a time, a particular area where there were stafng shortages was in the technology assessment unit, which of course is the rst step. Apart from the initial check of the licence application, the rst step is the technical assessment and whether the item needs a licence. We are all familiar with the scenario that when you take on new staff, the rst thing that happens is you get an even further deterioration in performance, because of the training demand of the new staff. I think that all those factors taken together have led to the situation that you describe. Barry Fletcher: Because of the lack of staff, one of the things that went on the backburner was the open




individual export licences for companies, which also meant an increase in individual licences. Chair: We come now to the UK/US defence trade cooperation treaty. Q52 Penny Mordaunt: It has been suggested that the treaty may be weighted in the USs favour. First, I wanted to ask for your views on that. If you think that, what are the implications for UK companies? Secondly, you have informed us that Pathnder testing of the treaty would end early this year and that a decision to implement the treaty would then be made. First, are you still in favour of its implementation and, secondly, do you think that full implementation of the treaty will still take place? Brinley Salzmann: I think that the decision will be made to implement the treaty. I believe that the MOD will have to make a decision about whether it wants to implement it on 29 February. The implementation date will be Monday 2 April, as far as I aware. So much political capital has been used up on both sides of the Atlantic that it is almost inconceivable that they will not go ahead and implement the treaty. The rst part of your question was about whether the US side would benet more than the UK side. The public consultation process was launched late last year by the US State Department, seeking public comments on the implementation plans for both the UK treaty and the Australian treaty, and the State Department took in all those responses and published them on its website. I think that you can clearly see for yourself that the US industrys viewpoint isif you describe it as lukewarm, you are being overly positive. US industry is not over-enamoured with the proposals for the treaty. Some of the respondents to the US State Department have clearly stated, Thank you for all your work, but, having looked at the implementation plans, we are going to carry on with ITAR routes and normal licences, because we do not want to have a more complicated dual-licensing compliance system in place. UK industrys viewpoint and US industrys viewpoint are both very critical of what has come out of it. We think that the treaty itself is a fantastic document. The problem is the implementation arrangements under the treaty, which underscore it and, to a major extent, undermine the treaty and the potential benets that could have come out of it. Chair: Now, the US proposals on dual and thirdcountry nationals. Q53 Ann Clwyd: You have expressed concerns, apparently, about the implementation of the recent amendments to ITAR, especially their implications as far as UK rms are concerned, as well as about compliance with human rights and other regulations and their possible impact on UK rms. Would you like to enlarge on that? Brinley Salzmann: The US export control reform process was launched a few years ago and we have been very supportive of it in principle. For the most part, of course, the devil is in the detail. You have to see the detail of what is being proposed by the US State Department for the US export control reforms. When we looked at Barack Obamas speech in early 2010 and Bob Gates statement, building on Barack

Obamas statement, you could see the tone behind it. We were fully supportive, because the issue of dual and third-country nationals was and is a major one for UK companies and other foreign countries companies. We were fully supportive of plans to try to rectify this with these new proposals, but when the State Department came out with its proposals in August 2010, we were not enamoured of what it was proposing. The devil was in the detail and it was not going the way that we wanted. Eventually, we worked very closely with the British Governmentthe Ministry of Defence; the Department for Business, Innovation and Skills; the Foreign and Commonwealth Ofce, and a number of other Departmentsto try to put in place some implementation plans for the dual and third-country nationals, under the proposed ITAR changes. I think we are generally happy with the solution that came of that, which the British Government managed to negotiate with the US Government. That being sai

Documents

Scrutiny of Arms Exports—Business, Innovation and Skills, Defense, Foreign Affairs and International Development - Vol.2