Register of Arms Brokers Bill [HL]

Baroness Neville-Rolfe Excerpts

Friday 10th June 2016 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills and Department for Culture, Media and Sport (Baroness Neville-Rolfe) (Con)]

My Lords, I thank the noble Baroness, Lady Jolly, for bringing this matter to the attention of the House today. I congratulate her on being number three in the ballot and on her thoughtful opening speech. She and I worked together on my first Bill as a Minister, the Consumer Rights Bill, and I learned a lot from her. I am also glad to see her so well supported by her fellow Peers today, and to hear in particular from the noble Baroness, Lady Smith of Newnham, whose comments about the principle of legislative brevity I agree with wholeheartedly—although this is in fact a rather wide-ranging Bill, as I will come to explain, with some problems. This is of course an issue which raises emotions, as the noble Lord, Lord Judd, made very clear in his contribution. I am delighted that the noble Viscount, Lord Waverley, is here. He rightly struck a sceptical note about the Bill, which he did from a degree of experience—both his own and that of people he has consulted.

This Government support a responsible defence and security industry that helps meet the legitimate defence needs of other states and contributes to their security and law and order. Such exports are worth some £11.9 billion a year and 600,000 jobs to the UK economy. The reputation for innovation, the “added values” in the words of the noble Viscount, Lord Waverley, and respect for human rights, which the noble Lord, Lord Stevenson, talked about—of course supported by a strong legislative regime that includes the Export Control Act and the Bribery Act—are all very important. We are also committed, as the noble Lord, Lord Stevenson, acknowledged, to better regulation, which means, in my book, regulating only when there is evidence of harm and introducing new regulation that specifically tackles that harm.

The Government agree, as I have said, on the need for comprehensive arms control measures. We take our responsibilities in this area very seriously and operate a robust and transparent control system—as robust as any state’s. It includes comprehensive controls on the trafficking and brokering of military goods: that is, controls on activities which facilitate or promote the transfer of military goods between third countries.

These controls have been in place since 2004, under the previous Government, following implementation of the Export Control Act 2002, and were significantly updated in 2009 with the introduction of the Export Control Order 2008, under which we operate. The controls were amended again in April 2014 to fully implement the UK’s obligations under the international Arms Trade Treaty.

Under our controls, a person in the UK may carry out an arms-brokering activity only if they have been granted a licence to do so by the Secretary of State for Business, Innovation and Skills. These controls apply to UK persons wherever in the world they are located—an important provision. Every licence application is individually assessed against the consolidated EU and national arms export licensing criteria. The criteria provide a robust risk assessment process that takes account of all available information, drawing on advice from the Foreign and Commonwealth Office and the Ministry of Defence. A licence would not be granted if there was a clear risk that the goods might be used for internal repression, would provoke or prolong conflict or be used aggressively against another country. We also take into account the risk that the goods might be diverted to undesirable end-users, including terrorists.

Any person who is subject to these controls and who carries out a brokering activity without a licence may be subject to criminal prosecution with a maximum penalty of 10 years’ imprisonment. These controls are rigorously enforced and the UK remains one of the few countries worldwide to have successfully prosecuted individuals for breach of arms-brokering controls.

The right reverend Prelate the Bishop of Derby, whose intervention was extremely thoughtful, asked about transparency. The UK publishes details of all export and trade licences granted, refused or revoked. These are published annually and quarterly. Publishing names may have commercial sensitivity issues, but there is a degree of transparency there which I regard as very important.

The noble Baroness, Lady Jolly, referenced the Committees on Arms Export Controls, which call for a register. The Government conducted a wide review of export control legislation in 2007, as I said, and concluded that a register would not justify the burdens on business at that stage. Then in 2014, as the noble Lord, Lord Stevenson, explained at some length, the Government considered the case for a pre-licensing register of brokers along the lines we are discussing today. A comprehensive call for evidence was conducted which considered whether there was a need further to regulate brokering activities within the legitimate defence industry and prevent illicit activity The consultation exercise sought evidence from all interested parties, including businesses, individuals and civil society groups, on the benefits and costs of introducing a register. As has been said, we received a total of 78 responses.

The Government’s response was published in July 2015. As the noble Lord, Lord Stevenson, said, there were two viewpoints. That there was no consensus is a fair conclusion to draw from that exercise, and we did not feel that there were sufficiently powerful arguments in favour of a register to justify the additional burdens that would be imposed on legitimate businesses.

I have already gone through some of the arguments made, so perhaps I may turn to the Bill. Any register of arms brokers, as proposed by the noble Baroness, would be in addition to the existing controls that I have described in some detail for the benefit of noble Lords. In considering the case for such a wide-ranging register, we would need to consider a range of factors. These include not only the extent to which a register might improve enforcement of existing controls but the impact on legitimate trade.

A key concern with a register is that it would do little or nothing to prevent the activities of unscrupulous brokers who operate outside existing brokering controls. Anyone who is currently prepared to broker without a licence is highly unlikely to be concerned about applying to be listed on a register. Such a list would represent a list of legitimate brokers and its creation would contribute little to dealing with those who seek to evade the controls. Where we have evidence of existing illegal brokering, we investigate and take appropriate enforcement action, including in the most serious cases, referring the case to the Crown Prosecution Service for criminal prosecution.

If someone was brokering without being registered—and therefore, by definition, without being licensed—we would need the same level of evidence to take action against them as we do now. The existence of a register would not improve our ability to enforce the controls, nor would it significantly aid intelligence-gathering. The UK already shares information internationally where licence applications have been refused.

We would also need to set out a list of criteria against which applicants for admission to a register would have to be assessed. We do not believe that the proposed concentration on tax status and criminal history would be as helpful as may be suggested, given the likely range of licence applicants—from individual applicants and small businesses to large corporates—including ancillary services such as transport, insurance and finance industries: a very wide net.

Another problem is that there is no correlation between tax status, criminal history and the potential end-use or end-user of the goods in question. Concentration on these aspects could serve to distract from the two main aspects on which strategic licensing controls are based: the nature of the goods and the nature of the end-use. We would also need to devote resources to making any such assessments, and to setting up fair processes and perhaps an appeal process for those refused registration. There would of course be an administrative burden on legitimate businesses in submitting an application and undergoing such an assessment.

We could reject an application to be added to a register only if there were sufficient grounds to do so, and any such decision could be open to legal challenge by the unsuccessful applicant. This raises further questions about how a register would operate which would need careful consideration.

The noble Lord, Lord Stevenson, talked about registration in other countries. It is of course true that a number of states operate a register. However, these registration models are introduced on the basis of different national legislation and in a business and regulatory environment structured differently from the UK, so we do not see a direct comparison with the system here, where the Arms Trade Treaty is key—and is a key part of UK foreign policy, to respond to a point made by the noble Lord, Lord Judd.

Taking the United States as one example, I say that any person wishing to engage in the brokering of defence articles or services must register with the US Department of State and pay a registration fee. However, this is effectively in place of a detailed licensing system of the kind we have, and I do not think that that is the intention here.

Maintaining the status quo in terms of the UK’s existing case-by-case licensing procedures is, as has been said, compatible with Article 10 of the Arms Trade Treaty, which requires countries to regulate arms brokering but does not state exactly the means of doing so.

We believe that our system is strong and covers the ground we need to cover.

The noble Baroness, Lady Jolly, also referred to Section 5 registration requirements for the holders of firearms licences. A Section 5 registration is a stand-alone regulatory obligation that serves a useful purpose. However, the Bill would impact on export licensing by imposing an extra regulatory burden on legitimate trade that would, as I said, do nothing to prevent the activities of unscrupulous brokers.

I should probably end there but, wherever noble Lords come from, one reason not to support the Bill is that, as the noble Lord, Lord Stevenson, made clear in his intervention, a register could be introduced under existing powers in primary and secondary legislation. There is no need to amend the Export Control Act 2002 to allow a register to be introduced.

In summary, the Bill could lead to a disproportionate impact on a surprisingly wide range of industries and businesses, introduce powers that we do not believe are needed, and could entail administrative costs and problems. We prefer, as I think I have made clear, to base our approach on a system of licensing controls which takes account of relevant risks by means of a thorough pre-licensing assessment. We believe that our current system is sufficiently robust and that we have the legislative powers to take further action if the situation changes.