International Military Sales Ltd

Jack Lopresti Excerpts

Tuesday 11th March 2014 Westminster Hall

[Mr Ben Wallace (Wyre and Preston North) (Con)]

It is a delight to serve under your chairmanship, Ms Dorries. May I draw attention to my entry in the Register of Members’ Financial Interests? I have been the chairman of the all-party group on Iran for the past nine years, and I am a former overseas director for the aerospace company Qinetiq.

I want to highlight the relationship between International Military Services Ltd and the Ministry of Defence, and a specific case as it relates to Iran. It is a sorry passage in our history and the UK’s relationship with that country. It is not only a sorry story, but un-British in that the process that I will describe has been marred by double dealing and obfuscation. The Minister will be relieved to know that I am not talking about recent history; I am talking about way back in the 1960s and 1970s.

In the days of the nationalised defence industry, the British Government established a private limited company as its trading arm to sell weapons and aerospace equipment abroad and munitions to overseas buyers, mostly to other Governments. A lot has changed since then and the aerospace industry has been almost completely privatised. For that reason, in 1991 it was decided to wind up this little shell company that was wholly owned by the Government. It would have been wound up, but for one problem—a debt owed by that company to the Government of Iran, equivalent to between £400 million and £500 million.

The debt may explain why, 23 years later, the company still exists. What was the cause of the debt and what should we do to put it right? Between 1971 and 1976, the Shah of Iran paid up front—quite rare in those days, and even today—the equivalent of £650 million for 1,500 Chieftain tanks and armoured vehicles. When in 1979 the revolution deposed the Shah, Britain quite rightly ceased those exports until the country had settled down and we clearly knew its intentions.

However, we chose not to return the equivalent of the £450 million that Iran had paid us. Instead, we sold the tanks to Saddam Hussein, who then proceeded to use a number of those tanks against the people of Iran. I think it is widely accepted that the west’s support for Saddam Hussein was a catastrophic error. That period of history is well behind us, and I hope we will not make such mistakes again. However, since that time, and despite Iran’s attempts through the rule of law to access the funds owed, the UK has held on to them.

I am not here to urge the British Government to break the successful sanctions regime, but I am here to urge that we honour the debt once and for all.

[Jack Lopresti (Filton and Bradley Stoke) (Con)]

I congratulate my hon. Friend on securing this debate. If the matter were to be resolved, what impact would it have on the sanctions that Iran has to adhere to, given what we know about some of their motivations and activities?

[Mr Wallace]

There would be no impact, because in this country we have the facility of the High Court. The funds are already held by the High Court on behalf of the Government, but should the High Court make a ruling, or a settlement be reached, they could be handed over within the parameter of the High Court and held until such time as they were unfrozen through the sanctions licensing scheme or made available as a result of a change to sanctions. This is not about releasing funds tomorrow morning to the Iranian Government, but about putting a wrong right, putting our relationship with Iran on a more open and just footing, and, hopefully, putting the matter right.

However, I am afraid that this matter does not quite end there, because Britain and Iran are signatories to the Permanent Court of Arbitration in the Hague, an international treaty whereby we effectively arbitrate over contracts. In 2001, the court ruled in favour of Iran to recover the debt. The onus is on the United Kingdom to honour its treaty obligations.

If we fast-forward to 2013, however, we find that Iranian officials, who had set out from Iran with UK visas issued by the Foreign Office, come to this country to access the services of the commercial court. On landing at Heathrow, their passports are removed from them, their visas are revoked and they are detained for a number of days in asylum centres. That was not a particularly British way to resolve an issue, especially given that we had only recently issued their visas. It was a worrying sign.

To date, the Home Office has not been willing to give me a full explanation of the reasons behind the officials’ detention. However, I am sure that the Home Office will be careful, because any court—any judge—would look very poorly on something that is done without a valid reason, as this case involves access to legitimate justice and our courts. Let me be clear: I am not seeking to change the sanctions regime and I am not seeking to hand this money over. However, in the current environment, in which we are trying to put UK-Iran relations on a better footing, I am seeking a swift settlement for all parties.

Across a range of areas, Iranian entities that are not under sanction and are not involved in any way with the Iranian Government are suffering as a result of the UK’s fear about extraterritorial US sanctions. That is because many of those sanctions, while they do not deal with US companies, have an extraterritorial reach that can unfortunately leave many British entities with a Hobson’s choice—trade with us or trade with Iran.

We are now in the rather perverse position in which the US Government are issuing letters of comfort to US banks to allow them to trade with Iran, and to allow them to have approved and licensed financial transactions with Iran, while our banks are receiving no such comfort or protection from the reach of Congress. American banks in the US are protected from Congress by the US Administration, but British banks are thrown to the lions.

As sanctions become a more common foreign policy tool—with some success; they have certainly helped to contribute to the process of Iran coming to the table—we in Britain should make it very clear that we will follow the rule of law, fill in the detail and ensure that sanctions are clearly adhered to. However, that does not discharge us from our outstanding obligations.

Previously, there have been numerous rulings in the UK, Germany and the US courts that clearly distinguish the difference between the discharge of an obligation by a party—in this case, the obligation of International Military Sales Ltd to the Iranians—and the payment of the funds to a designated entity. They are two separate issues and to conflate them, as people have tried to in the past, supposedly as a reason for not resolving this matter, is to put unnecessary and unreal barriers in the way.

I would like to hear from the Minister. I am grateful to him for coming to Westminster Hall today, because I am aware, as chairman of the all-party group on Iran, that Iran policy is way above my pay grade. It is made by the P5+1, and in No. 10 and the White House. However, I would be very grateful if the Minister at least recognised the importance of resolving this matter. We should wind up the company, which has existed in limbo for 35 years, and we should discharge the MOD’s obligation to a brass plate somewhere else in London. We can then put this sorry tale behind us.