Arms Exports

Michael Fallon Excerpts

Thursday 13th December 2012 Westminster Hall

[The Minister of State, Department for Business, Innovation and Skills (Michael Fallon)]

I repeat hon. Members’ welcome to the Chair of the Committees, my right hon. Friend the Member for Tonbridge and Malling (Sir John Stanley), and thank all those who contributed to our short debate. I thank my right hon. Friend in particular for all the work he does in chairing the Committees and for his kind words at the beginning of the debate.

Since becoming the Minister with responsibility for export controls, I have become acutely aware of the challenges posed and the passions aroused by the export of strategic goods. On the one hand, we want to give export licence applications the fullest scrutiny to ensure we do not license anything that would be used for internal repression or would fuel conflict or breach an embargo. We also want to be as transparent as possible about our activity in this area, in recognition of the strong parliamentary and public interest. On the other hand—the hon. Member for Hartlepool (Mr Wright) recognised this—successive Governments, including this one, have been committed to a strong defence and security industry, which helps to meet not only our own defence needs, but the needs of other states.

[Mrs Linda Riordan in the Chair]

We are also committed to growth in exports, including of defence and security equipment, as a key element of our prosperity agenda. This requires us to operate a fast, efficient export licensing system that facilitates responsible exports while imposing the minimum regulatory burden on business. As Members who have spoken today fully understand, every case is assessed on its own merits against the consolidated criteria, taking account of all the relevant facts available to us at the time. These are often, as I have learned over the past few months, difficult decisions. Circumstances change and new information comes to light, and where it does, it is right that we should review our original decisions.

I will deal with as many of the issues raised today as I can, and if I am unable to respond to certain questions I will ensure that responses are forwarded to Members shortly afterwards. I shall deal with the issues raised about the Arab spring, some changes we are making to the Export Control Organisation, enforcement and transparency, and the arms trade treaty. If time allows, I will then deal with some of the more specific questions addressed to me. I cannot promise to answer them all.

The unforeseen events of the Arab spring—I take the point made by the hon. Member for Ilford South (Mike Gapes) that we should perhaps no longer call it that—posed a stern challenge to our strategic export controls, in particular ensuring that British equipment was not used for internal repression. Our export licensing system allowed us to respond quickly to changing facts on the ground. The Government reacted swiftly to events. We reviewed extant licences to the affected countries and moved quickly to revoke licences where the changed circumstances meant they were no longer in line with the consolidated European Union and national arms licensing criteria.

In 2011, 162 export licences were revoked: 72 for Libya, 35 for Bahrain, 43 for Egypt and a few for other countries. Those revocations show how seriously we take the guiding principle of responsible export controls. Given the significant changes in the region, it is right and reasonable that risk assessments should be updated and, in some cases, lead to a change in decision where the licence is no longer consistent with the consolidated criteria. The evidence suggests that the system is working, not failing, and does not, of course, mean that the original decisions were flawed in the context of the prevailing conditions at the time they were made.

On the performance of the Export Control Organisation, its primary target—the hon. Member for Hartlepool picked up on this—is to process 70% of standard export licences in 20 working days. I am pleased that the organisation has consistently been hitting this target in 2012 and is on target to achieve some 71% this year, despite a substantial increase in case load. It is true that ECO fell slightly below the 70% target in 2010 and 2011, following a 25% and an 11% increase, respectively, in its case load in successive years. However, the 70% target being met prompts the question of the other 30%. The ECO has a supplementary target to process 95% in 60 working days, and it has also been hitting that target, the year-to-date figure being 96%. However, given that 60 working days equates roughly to three months, this implies that 5% of licence applications—roughly 800 a year—will take longer. Of course, any delay in processing a licence application is regrettable. Cases that take longer are, overwhelmingly, those that raise sensitive political questions on which Ministers need to be consulted. Such cases can also involve possible diversion concerns or the risk of the goods being used against our troops.

I am concerned that the implication that some 800 licences per year are going to take longer is becoming harder to justify. The pace of international trade is increasing and exporters need to be able to respond faster when they win an order. Furthermore, we need to bear it in mind that, as a Government, we are urging companies to raise their exporting game as part of the growth agenda. That places additional pressure on us to deliver timely decisions. The ECO is looking further to improve its performance targets.

On using open individual export licences to replace and reduce the number of standard individual export licences, as part of the Government’s improvement project within the export control services, the ECO intends to improve the process of applying for OIELs. That does not mean that the Government will relax their risk assessment of OIELs, but we wish to address the current situation because exporters are being deterred from applying for OIELs by shortcomings in the process.

In the industry evidence session on 3 December, we heard a call for a UK continental shelf OIEL, and I am pleased to announce that such an OIEL has now been designed to meet industry’s requirements and save the need for multiple SIEL applications from a number of companies. The new OIEL authorises the export of controlled items for use in offshore installations and associated vessels within the UK sector of the continental shelf, and is valid for five years.

The ECO has also introduced improvements to its advisory services. The control list classification service replaced the ratings enquiry service in 2011. We advise exporters, if they are unsure whether their goods need an export licence, that they may either self-rate or make use of the advisory CLC service. To assist in self-rating, the ECO provides three tools that are designed to help exporters to identify the rating entry number of their particular goods on a UK strategic export control list.

First, the CLC search tool is available via ECO’s SPIRE—shared primary information resource environment—export licensing database. It is designed to help exporters search previous rating assessments made by the technical assessment unit. By using the tool, exporters can get an indication of whether their items are listed on a control list and what the rating entry for their particular goods might be. The search tool is designed to work in conjunction with the goods checker database, a separate website that enables exporters to perform key-word searches on the specific wording of the UK strategic export control lists.

Secondly, if exporters are unable to self-rate, they can make a CLC service request online, via the SPIRE database. It is a non-statutory advice service that does not amount to the issuing of an actual licence but advises exporters of the rating entry of their goods on the strategic control lists. Finally, a recent enhancement to SPIRE provides that the ratings of the goods appearing on an SIEL will be provided with the SIEL when it is issued, enabling the exporters to build up a picture of their licensable and non-licensable goods.

[Sir John Stanley]

May I go back to what the Minister said earlier when listing, country by country, the number of arms export licence revocations following the Arab spring—or whatever we choose to call it? Does he not agree that the number of arms export licence revocations for Saudi Arabia stands at precisely zero, albeit at the time of the Arab spring Saudi armed forces crossed the causeway into Bahrain and took over guarding essential infrastructure facilities, thereby releasing Bahraini forces who carried out serious human rights abuses that were rightly condemned around the world? Does he not agree that it is not surprising that within the Committees and much more widely, we wonder whether, if Saudi Arabia were not such an important area for arms exports from the UK, a different revocation policy towards the country might have been followed?

--- Later in debate ---

[Michael Fallon]

My right hon. Friend has made his point and, indeed, his allegation. All I can say is that such issues are reviewed case by case. Factually, he is right that no licence to Saudi Arabia was revoked but, to date, there is no evidence that UK-supplied equipment has been used in breach of the criteria in either Saudi Arabia or in Bahrain where Saudi forces were deployed in 2011. I appreciate that he is making a slightly different point about the diversion of Bahraini forces, but there is no evidence to show that the UK has supplied such equipment to date.

[Katy Clark]

Does the Minister agree that this situation highlights one of the concerns? We take such decisions only once the equipment has been used. Perhaps we need a more common-sense approach to the question whether our equipment would be used by a repressive regime if its authorities took action that contravened people’s individual human rights.

[Michael Fallon]

I am not quite sure what the hon. Lady means by taking a common-sense approach. Is she suggesting that at the beginning of something such as the Arab spring, we should simply list more countries that we are not prepared to sell arms to?

[Katy Clark]

I am happy to answer the Minister. I am suggesting that in certain countries it would not be surprising if, in future, the authorities repressed their own people who were fighting for democratic rights. If we have sold a lot of equipment to such a country, it is likely to be used in such repression.

[Michael Fallon]

I understand and take the hon. Lady’s point. I repeat, however, that there is no evidence so far that equipment supplied by the United Kingdom to Saudi Arabia has been used in breach of the criteria. Obviously, if any evidence comes to light, we would certainly need to re-examine the position.

On the improvements to the Export Control Organisation, I was touching on the CLC service, which is a non-statutory advisory service, so no performance targets were published, although it had some initial teething problems while the ratings backlog was being addressed. The service is now performing better, however, with around 45% of inquiries being processed within 20 working days. As a non-statutory advisory service and with a number of self-rating tools available to the exporter, the CLC service is not able to compete for valuable technical resource, which must first serve the priority casework for HMRC snags where goods are detained on the point of export, as well as SIEL applications of course.

The hon. Member for Hartlepool made a point about training. For companies that would like to find out more about the rating process, the ECO runs a training course for exporters on control list classification and use of the checker tools—a full-day workshop held approximately every six weeks. The course is designed to give attendees confidence in identifying control list entries that specify their products.

The ECO is keen to identify further areas for improvement and, accordingly, has a service improvement project in place. It is a continuous improvement programme and includes changes to the export licensing system known as SPIRE, encouraging the use of open and general licences and the provision of better and more comprehensive advice for exporters. As part of that process, the ECO has identified the need for a change to the end-user undertaking that accompanies an application for an SIEL, splitting it into two: a normal undertaking and a stockist undertaking.

The ECO will shortly produce the new forms and their associated guidance in translation to help exporters explain the requirement to their overseas customers. Changing the end-user undertaking will help to speed up the export licence application process by reducing the number of times that a licence is held up by the need to clarify information on the end-user undertaking document. To assist in the completion of the forms, the ECO is planning to provide guidance in the following languages: Arabic, Chinese, French, German and Spanish.

The ECO is also working to develop a manual and online training for exporters who use the SPIRE electronic export licensing system. It is developing desk instructions for staff that it hopes will improve consistency in the processing of export licences. It has also been mapping the customer journey on export licensing, so that it can better understand the pinch points in its processes. The intention is that that will lead to the development and delivery of tailored customer service training for ECO staff.

The ECO is implementing a new telephone system, which will provide better call and queue management, with pre-recorded messages and guidance information, and management information to ensure a better service to companies. The aim is to deliver management information on issues such as waiting times and dropped calls to enable the further fine tuning and development of the system.

Open general export licences have been very successful. They are one of the main reasons why the UK export licensing system is recognised as one of the best in the world. The light-touch approach of OGELs, coupled with rigorous enforcement through pre-registration and periodic risk-based audit, is virtually unique in the international community, although the UK model is now being adopted elsewhere, including by the European Commission, Germany and the United States, among others.

Industry wanted a much less complicated OGEL system that was easier to navigate and understand and that was written in plain English and with reduced legal terminology. The ECO initiated an OGEL review at the end of 2010. That work has now progressed to include a format that has been approved by the Plain English Campaign and the Export Group for Aerospace and Defence. The first licence issued under the new format was the OGEL relating to military components, which received the Plain English Campaign’s accreditation for clarity in July. The ECO has recently received further such accreditation for work on the OGEL relating to military goods, software and technology. All those things will take time to deliver, but we are already seeing the first fruits of these initiatives.

[Mike Gapes]

May I seek some clarification? The Minister touched on the Arab spring and then moved on to the issues he has just dealt with. I am interested to know whether he will respond to my point about Syria at some stage.

--- Later in debate ---

[Michael Fallon]

I will try to respond shortly to some of the more specific points that have been raised, and I hope Members will bear with me. Before I do, however, I want to touch briefly on three issues: enforcement, transparency and the arms trade treaty.

On enforcement, it is of course important that our controls are enforced robustly. Her Majesty’s Revenue and Customs is the lead department for enforcing strategic export and trade controls, as well as sanctions and embargoes. It works in collaboration with the UK Border Force and the Crown Prosecution Service. In the last financial year for which figures are available, 141 illicit shipments of goods were seized, which was the highest number of seizures for 13 years; a further 188 shipments of goods of proliferation concern were stopped at ports; eight compound penalties were issued for breaches of the controls, totalling more than £500,000; and a successful prosecution for breach of the trade controls resulted in a custodial sentence of three and half years. Only last week, it was widely reported that arms dealer Gary Hyde was sentenced to seven years’ imprisonment for involvement in the illegal shipment of 80,000 weapons and 32 million rounds of ammunition from China to Nigeria and for laundering the proceeds.

Several Members have touched on transparency. As a result of the Government’s policy on transparency and recognising its importance to strategic export controls, my right hon. Friend the Secretary of State for Business, Innovation and Skills laid a written ministerial statement on strategic export controls before the House on 7 February in which he outlined three proposals to increase the transparency of the export licensing process. The first is to insert into all open export licences a provision requiring the exporter to report periodically on transactions undertaken under such licences. The Government will publish that information, and that quarterly reporting will take place in arrears from April 2013. The others are to explore ways to make additional information contained in standard applications public, while protecting any sensitive material, and to appoint an independent person to scrutinise the operation of the ECO’s licensing process. The role of that independent person would be to help to confirm that the process was indeed being followed correctly and to report on the ECO’s work.

On 13 July, following a consultation, my right hon. Friend the Secretary of State gave an update on the transparency initiative via a second written ministerial statement. The first two proposals will result in a significant increase in the amount and quality of information that the Government make public about controlled exports. On the third proposal, regarding the appointment of an independent reviewer, there was less understanding in the consultation of how that reviewer would operate and what benefits the role would bring. We will therefore return to the issue at a later date.

Finally on the major topics, let me turn to the arms trade treaty, which several Members have asked about. I reassure them that the UK is firmly committed to securing a robust and effective legally binding arms trade treaty to regulate the international trade in conventional arms. Our aim is a treaty that covers all conventional weapons, including small arms, light weapons and ammunition. Some progress has been made, and the international community has moved some way towards agreeing a strong treaty. After the recent vote at the UN, there will be a diplomatic conference in March 2013, at which we will aim to conclude the treaty.

A robust arms trade treaty will support our commitment to British values, including human rights and international humanitarian law. We also want a treaty with a wide membership and sufficient global coverage to be truly effective. We will continue to lead international efforts towards that goal, and we will continue to work hard, including with industry and civil society, to secure both aims. Negotiating legally binding requirements for the regulation of the conventional arms trade is obviously a complex business—if it were easy, previous Governments would have done it.

In the time remaining, I want to touch on some of the specific questions that have been raised. I am grateful to my right hon. Friend the Member for Tonbridge and Malling for sketching out the areas of agreement between the Committees and the Government; as he said, it is important to put those on record before turning to some of the areas of disagreement. He highlighted what has been done on bribery and cluster munitions, as well as our bar in terms of arms control for the purposes of internal repression.

My right hon. Friend asked me specifically about extraterritoriality. There are some difficulties. Extraterritorial controls would apply to acts done outside our jurisdiction, so they would be, by their very nature, extremely difficult to enforce. That is why successive Governments have maintained a policy of applying extraterritoriality only to the most serious offences. We are therefore not convinced of the need to expand the extraterritorial aspects of the trade controls to include all the items on the military list. Such an expansion would impose significant burdens on legitimate businesses that need to move goods between overseas countries as part of a global supply chain, and it would not increase our ability to take action against those brokers whose activities are of the most concern. The items that are subject to extraterritorial control are those whose supply is subject to international agreements. We would, of course, be happy to consider additional controls where there was hard evidence of undesirable activity.

My right hon. Friend asked me three further very specific questions—two of which it would probably be more appropriate for a Foreign Office Minister to answer—but if he will allow me, I will reply to him in writing on all three.

The hon. Member for Ilford South did indeed raise a number of quite wide-ranging foreign policy issues, and they were certainly well in order in a debate about arms control. They reflect his knowledge and experience of past conflicts. I am not sure that I can answer some of his more wide-ranging questions, but I do want to answer his points about Syria. What hung over the points that he made and the questions that he asked was the extent to which we should get involved with assisting the opposition forces there.

As the hon. Gentleman knows, the Foreign Secretary announced on 20 November that the Government have decided to recognise the National Coalition of Syrian Revolutionary and Opposition Forces as the sole legitimate representative of the Syrian people. We have provided equipment, such as water purification kits, portable power generators and communications equipment, to unarmed civilian opposition groups in Syria. Those groups have been carefully selected as influential civil society and opposition organisations engaged in vital work in some of the areas worst affected by violence in Syria. There are currently no plans for arming the Syrian opposition being made by the European Union, and any change to that policy will of course be announced to Parliament.

[Mike Gapes]

I am grateful for the traditional response that there are currently no plans, but, as the Minister knows, discussions are going on internationally at this very moment, and it is reported widely that some of our key NATO partners are already in the process of giving some equipment to those who are combatants—not just NGOs and civil society organisations. It is also reported that they receive a large amount of weaponry from some leading Arab countries, with which we are also in alliance. May I seek clarification? The Minister referred to communications equipment. For example, could that be used in conjunction with offensive and lethal equipment by participants in the conflict in Syria?

[Michael Fallon]

No; the communications equipment is being supplied only to selected unarmed civil opposition groups, which are engaged specifically in helping and working in some of the areas worst affected by the violence. I fully appreciate the hon. Gentleman’s interest in some of the discussions that are going on, and I am happy to confirm—although this does not help him—that, as he has identified from the reports, those discussions are going on with our international partners at the moment. I cannot comment on the details. The plain fact is that until any policy is changed or plan made there cannot be an announcement; that cannot be other than by a formal statement to Parliament, and, if the policy is changed, that is what will happen.

The hon. Member for North Ayrshire and Arran (Katy Clark) asked me about the Arab spring and the arms trade treaty, but also about Israel. Israel, of course, faces security threats, and we do not think that an arms embargo would increase our influence or lead to progress in the peace process. Where appropriate, we can and do refuse export licences to Israel. We have refused them in the past and will continue to do so if the criteria are not met. I do not want to go into detail about individual licences.

The hon. Lady mentioned the situation in Gaza, if I recall correctly. At the time of the previous incursion into Gaza, the Foreign Secretary in the Labour Government clearly set out the details of UK components and equipment that might have been used in Operation Cast Lead. UK equipment was not exported for specific use in that operation, and the then Foreign Secretary made it clear that the consolidated criteria were properly applied at the time of issuance and there was therefore no breach of them.

At that time, Israel, I am informed, procured more than 95% of its military requirements from the United States. The European Union accounted for a proportion of the remainder. The three largest European Union exporters of military goods to Israel are Germany, France and Romania, with UK exports accounting for less than 1% of total Israeli military imports. Of course, that was the previous operation in Gaza, but if the hon. Lady has further information or evidence that she would like us to consider, I shall be happy to look at it.

The hon. Member for Hartlepool asked a series of questions, and I think that I welcome what he said about the general application of the export control process. He said that he wanted strong—I think that he then said stronger—controls over licences, but when he said that he also wanted them speeded up, he put his finger on the balance that is needed. I do not think that it was wholly unfair to suggest that the system is slowing. As he conceded, the volume of exports is increasing—both across the board and in the area in question. I want to ensure that the system is robust and improved enough to match the increase in exports that he and I would both want.

The hon. Gentleman asked me specifically about two things, one of which was brass-plate companies. My right hon. Friend the Member for Tonbridge and Malling will know that that the Government have explored avenues of enforcement against such companies, which involve non-UK persons who trade in arms and proliferation activities outside the United Kingdom through companies that are registered inside the United Kingdom. We have looked at a range of options, but it is difficult through UK law to ensure that any measure tackles that overseas trade. Pre-licensing registration is unlikely to deter that sort of illegal arms trader, as revocation of registration is unlikely to affect that trade. I do not think that it is possible for the Government to come up with a simple answer. In a previous report, the Committees recommended that we explore possible ways to take enforcement action, including consulting enforcement agencies in other countries, but as we see it there are legal difficulties.

The hon. Member for Hartlepool suggested that we should move to a system of prior scrutiny. I would like to read his speech to see how that system might improve what exists at present. It is interesting that that approach is applied in the United States, which is a major arms exporter.

I thank all the right hon. and hon. Members present for their attendance and questions. I repeat my thanks to the Committees for the report and the work that they do. Their scrutiny is an important aid to the licensing process, and I look forward to their contribution and the continuing dialogue between the Committees and the Government in the coming year.