Register of Arms Brokers Bill [HL]

Lord Judd Excerpts

Committee: 1st sitting (Hansard): House of Lords
Friday 18th November 2016 Lords Chamber

[Lord Judd (Lab)]

My Lords, I must also apologise for not having been able to participate at Second Reading. However, I am glad to say that I cannot think of a Bill that is more pressing or important in the highly dangerous world in which we live.

Weapons are lethal. I have always held the view that the export of arms is so dangerous that it should be only to recognised allies, in the context of alliances to which we belong, or in the case of very specific arrangements that further defence interests as we see them and which can be monitored. The ethos has to be changed from one of exporting arms unless there is a reason not to, to seeing arms as very dangerous, hazardous and unwise things to export unless there is a very good reason for doing so. I believe that that underlying ethos is crucial. In the context of what I have just said, the amendment speaks for itself. As far as I am concerned, I warmly applaud it, as I do the Bill, and hope that it succeeds.

[Baroness Jolly]

Perhaps I can better help the noble Lord, Lord Swinfen, by explaining that the issue he raised comes under the second group of amendments. The amendments in the first group are merely technical to determine how such legislation could take effect.

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[Baroness Jolly]

This amendment is really the nub of what we are trying to achieve. It calls for a fit and proper test for arms brokers. The majority of British arms brokers are decent, upright citizens who have chosen this particular profession and would most certainly pass any fit and proper person test as defined by the Secretary of State. However, as the Minister indicated earlier, some are brass-plate operators and work in offshore tax havens such as the British Virgin Islands, Cyprus, Hong Kong, Liechtenstein or Gibraltar. They pay no tax on considerable earnings.

The events of earlier this year highlighted the key role that offshore shell companies have played in large-scale tax avoidance, prompting a series of reforms and proposed new legislation in the Criminal Finances Bill, which will come before this House some time early next year. There is widespread political support to crack down on these activities and make it harder for individuals to use such offshore vehicles for tax avoidance, including greater powers of disclosure over such overseas assets.

Crucially, these offshore company vehicles have not just been used by those seeking to avoid paying tax. There is a direct link to arms brokering in that they are also the vehicle of choice for arms brokers wishing to conceal their activities. Here, I am clearly not referring to perfectly bona fide arms manufacturers, Ministers, members of the Cabinet or whatever who, if they are caught within the remit of the Bill, are caught totally unintentionally.

A registration system of arms brokers, including mandatory disclosure of all overseas company assets, would serve as a major enforcement tool for Her Majesty’s Government to tackle illicit brokering. It would also be fully consistent with complementary to parallel initiatives being pursued to clamp down on tax avoidance using the same overseas company vehicles and structures. As such, it would be wholly inconsistent with emerging government policy in this area and a huge missed opportunity to exclude arms brokering activities from the process of establishing greater oversight and regulation over offshore companies.

The UK has one of the most active and lucrative arms industries in the world and, at a time of global instability, it is critical that we play our part to ensure that it is transparent. Over 30 industries in the UK require registration, from bouncers to beauticians, yet people who make millions trading weapons, bombs and military equipment have no such scrutiny. The amendment would require all UK arms brokers to pass a fit and proper person test, bringing us into line with most western countries, including the USA and Australia. I beg to move.

[Lord Judd]

My Lords, the amendment is critically needed. It relates to my previous point. Ideally, we should export arms only when they are furthering our defence policies or our strategic alliances for specific purposes. If they are exported outside that context, it should be in a very carefully considered way that contributes towards world peace and stability. Of course all the huge issues of end use and the rest are critically important for context. From that point of view, I can imagine that only the most responsible citizens are qualified to be involved in this trade. The amendment is very important if we are to take the whole purpose of the Bill as seriously as we should.

[Lord Wallace of Saltaire (LD)]

My Lords, perhaps I may press the Government a little on the extent of this register for arms brokers. My noble friend Lady Jolly has spoken about how, in the past, companies in the overseas territories and Crown dependencies have been used for quite extensive arms brokering to foreign companies. Many of us will remember a number of instances of that. I and others will also be aware of the extent to which our Government provide support to companies based in the overseas territories and Crown dependencies in their exporting activity but do not register and regulate them entirely. That is a possible loophole, which the noble Lord, Lord Stevenson, might even describe as a lacuna. It is important that we should be clear quite how far registration and regulation extends. Questions of transparency and proper regulation are always left ambiguous when offshore companies operating in our overseas territories and Crown dependencies are engaged, and historically they have been very active, in the arms brokering trade. I would like further clarification on that.

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[Baroness Mobarik]

My Lords, this amendment would remove references to the consideration of criminal history and tax status to leave the determination of who is a fit and proper person to guidance that would be issued by the Secretary of State. Any fit and proper person test as a prerequisite for inclusion on a register would need to apply to all categories of applicant, including businesses, individuals, non-governmental organisations and other entities, and be robust enough to hold up to legal challenge if necessary. The Government, who remain committed to better regulation where it is necessary, consider the existing control regime to be sufficiently robust and fully in line with our obligations under the international Arms Trade Treaty. Requiring brokers to register in the way proposed would make the system considerably more complex.

I will pick up on a couple of points the noble Baroness made. The first we referred to earlier, which is brass-plating. Existing legislation would, in certain circumstances, allow enforcement action to be taken against brass-plate companies and their officers. However, there needs to be sufficient evidence to justify any such action. On her other point on tax evasion, HM Revenue & Customs considers all credible information regarding potential breaches of UK strategic export and trade controls, and takes a range of enforcement action based on the particular factors of each case.

I will refer to something that the noble Lord, Lord Judd, raised on human rights issues. Risks around human rights abuses are a key part of our assessment. We do not export equipment where we assess that there is a clear risk that it might be used for internal repression, would provoke or prolong conflict in a country, or would be used aggressively against another country.

Each licensing decision is currently considered on its own merits against the consolidated EU and national arms export licensing criteria, known as the consolidated criteria. This provides a thorough risk assessment framework and requires us to think hard about the impact of providing or brokering arms and equipment and their capabilities. These are decisions we never take lightly.

I should make it clear that the UK operates one of the most robust and transparent export and trade control systems in the world. We are confident that, by considering all applications against the consolidated criteria, we employ a thorough risk-based approach to determine whether to grant a licence to a particular end-user or broker.

Finally, we are proud of the fact that the UK has been at the forefront of addressing concerns on arms brokering by introducing controls that apply not only in the UK but extraterritorially. That was the point that the noble Lords, Lord Wallace and Lord Stevenson, made. It is quite a technical issue and I can write to noble Lords to clarify further. As I said, it applies not only to the UK, but extraterritorially to UK persons overseas. This signifies our clear intention to prevent UK persons escaping brokering controls by simply operating outside the UK.

[Lord Judd]

I thank the Minister for responding to my intervention, but I do not believe she has quite taken the point. My concern is that weapons are so dangerous and potentially negative in their effect that they should be exported only in situations in which peace and stability are at risk, or an agreed necessary military action, in the context of an alliance, is undertaken. I cannot see really, logically, why anyone else would come in with a desire to export arms if it did not fit into that context. If it did fit into that context, why would somebody else have to apply? It therefore seems to me that if we are going to have these free-standing individuals operating in the market, they need to be incredibly responsible citizens who fully understand what the purposes of foreign defence policy, stability policy and all the rest really are. Otherwise, we are in a situation in which the conveyed message is that it is okay to export arms, unless we establish through our very effective controls systems that there is a very good reason for not doing it, whereas I think there has to be a very good reason for doing it. From that standpoint, this amendment moves in the right direction.

Amendment 3 agreed.