Re-Export Controls Bill [HL]

Lord Mackay of Clashfern Excerpts

Friday 3rd December 2010 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

I thank the noble Lord, Lord Alton of Liverpool, for bringing this matter to the attention of the House today. The current situation is as follows. Goods controlled for strategic reasons require a licence for export from the UK. We do not currently operate re-export controls which would require overseas entities to seek permission from us to re-export items that have already been exported from the United Kingdom, no matter how long ago.

The Government are not convinced that introducing controls of this kind is either necessary or feasible. Such a system could be onerous to operate and would be extremely difficult to enforce outside the UK’s legal jurisdiction. Once a good has left the UK, it is, in practice, under the jurisdiction of the destination country. We would, in effect, be claiming that UK export controls applied, whereas in reality we would have no powers to enforce them.

The noble Lord’s Bill is presumably driven by a concern to prevent UK goods, once exported from being re-exported for undesirable uses. We already tackle this issue through our existing export licensing system, which the noble Lord has rightly praised as being among the most thorough in the world. Furthermore, we already take account of the risk of diversion—in other words, the re-exporting of goods to undesirable end-users—in our risk assessment of the licence application. No licence would be issued unless it was consistent with the consolidated criteria. Where licences have already been issued and information subsequently comes to light of an undesirable re-export, we have a power to revoke the licence in our secondary legislation. The impact of doing so would obviously be limited if the goods had already been re-exported, but we would always factor that information into subsequent licensing decisions. Even if we had full re-export controls in place, it would be unlikely that we would know that a re-export had occurred because we could not force a foreign entity to provide that information. In all likelihood we would only find out after the fact, by which point it would be too late to try to take any meaningful action. If an undesirable export had taken place, that would form part of our assessment of future export licence applications, but we do that now so there appears to be no additional practical benefit from the noble Lord’s proposals.

The majority of re-exports would not be of concern to us. The reality is that arms are a small proportion of the UK’s defence exports, a significant proportion of which are of low-level components being exported as part of a global supply chain. The equipment that these components go into is most often destined for our allies and partners, who have similar and equally robust export controls of their own. There are significantly more destinations of no concern than destinations of high concern. In response to the noble Lord, Lord Young, regarding other countries of concern, we agree that it is undesirable for UK-origin goods to be re-exported to destinations or end-users of concern. That is why the risk of undesirable re-export is embedded in our assessment of licence applications. If the risk of re-export is sufficiently high an export licence would not be granted. It is an issue of proportionality, and as I said, there are significantly more destinations of no concern than of high concern, which is why we judge that the current scope of the re-export clause is appropriate, as it covers the most sensitive destinations.

The noble Lord, Lord Alton, and the noble Baroness, Lady Falkner, spoke of other states. It is true that other states have reintroduced re-export controls, as acknowledged in a briefing produced by Safer World which said that states were reluctant to go on record regarding specific instances where re-export controls have been applied as that tends to involve confidential discussions with the original recipient. Aside from the United States, which is open and in some cases forceful in pursuing a re-export control policy, the evidence on the effectiveness of the arrangements in other states is unclear. The United Kingdom has one of the most robust strategic export licensing systems in the world, as I have already said, and I do not believe that the introduction of re-export controls would make it more so.

The noble Lord, Lord Alton, referred to administrative burdens. There could be significant practical problems and resource implications for government and possibly for industry in dealing with re-export control provisions. The export group for aerospace and defence—EGAD—said in a memo, which I shared with the noble Lord, that there could be low administrative burdens for the UK industry. As I said, we would need to conduct a full consultation to establish the scale of the administrative burdens that would be created for both government and industry. I should add, in response to the noble Baroness, Lady Falkner, that even if we apply re-export controls only to a limited set of countries there would still be a burden that we would need to assess.

The noble Lord, Lord Bates, rightly raised the issue of the re-export clause recommended by the parliamentary committee on arms exports. It is important to recognise that the end-user undertaking is a commitment made in good faith on the part of the recipient of the goods exported under the standard or open individual export licence. It has no force in law and cannot be used to prevent the re-export of goods. We require this commitment from the end-user in recognition of the serious threat posed by the proliferation of WMD and multilateral commitments that we have entered into. In recognition of the concerns on this issue and in response to calls from the Committee on Arms Export Controls, we amended the end-user undertaking for standard licences in July this year to make it clear that an export licence does not authorise re-export and that risk of unauthorised re-export is a factor in our licensing decisions. We deliberately limited it to embargo destinations which we consider to be the most sensitive transfers because, as I have already said, the majority of the exports are not problematic. That amendment was welcomed by the Committee on Arms Export Controls, which reflected that this new measure should be allowed time and that successor committees may wish to monitor its effectiveness to review whether a wider re-export clause remains desirable. I agree with that view and await the outcome of the new committee’s assessment with interest.

In response to the noble Baroness, Lady Kinnock, I say that since not all countries operate effective export control systems the Government are fully committed to agreeing a strong and comprehensive arms trade treaty at the United Nations. Such a treaty would be expected to raise global export control standards. As a result, transfers of concern would be less likely to happen because state signatories would have regard to the same principles when deciding whether to permit the export. As noble Lords will know, preparations are continuing towards the diplomatic conference in 2012. I would like to see the outcome of that process before committing to take action on this issue.

The noble Lord, Lord Young, asked about illicit trade in small arms by criminal gangs. He said that the majority of arms are held in private hands which may fall into criminal hands through theft. While I understand the problems that that causes, I cannot see how re-export controls would prevent that criminal activity. In summary, we prefer to base our approach on thorough pre-licensing assessment, which takes into account the risk of diversion or re-export to undesirable end-users at the application stage. We believe that our current system is robust. Re-export controls would not make it more so.

[Lord Mackay of Clashfern]

Will my noble friend explain further why there is a jurisdictional problem in relation to this proposal, which apparently does not exist in relation to the existing arrangements under which re-export to an embargoed country is forbidden? The same point arises in relation to enforcement. Again, enforcement must depend on information from overseas which would be applicable in this case. Apparently the Government object to this case but not to the export to embargoed countries.

[Baroness Wilcox]

My Lords, I thank the noble and learned Lord, Lord Mackay, for his intervention. It is important to recognise that the end-user undertaking is a commitment made in good faith on the part of the recipients of the goods exported under a standard or open individual export licence. This has no force in law and cannot be used to prevent the re-export of goods.