Arms Exports and Arms Control

Michael Fallon Excerpts

Thursday 21st November 2013 Westminster Hall

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

It is a pleasure to respond to this important debate. I, too, thank all those who have contributed this afternoon. I also thank the Committees for their hard work in scrutinising our actions in the area of export control.

I first reassure the Chamber that the Government are committed to managing all transfers of strategic goods responsibly. That involves, as the Committees recognised, a delicate and continual balancing act. On the one hand, there are valid concerns, articulated on many occasions by right hon. and hon. Members, that strategic goods should not fall into the wrong hands. That is why all export licence applications are carefully assessed, case by case, against the consolidated European Union and national arms export licensing criteria, taking into account all relevant factors—including the prevailing circumstances in the recipient country, the nature of the goods, the identity of the end user and the stated end use.

A licence will not be issued if to do so would be inconsistent with any provision of the criteria, including if there is a clear risk that the proposed export might be used for internal repression. On the other hand, the Government support responsible defence exports and we remain committed to a strong defence industry. Our defence exports rose by 62% in 2012, and totalled £8.8 billion in that year. Defence exports are only a proportion of what we license; defence and security exports, taken together, rose to £11.5 billion in 2012. The importance of those exports to our economy is self-evident from those figures, so we need to operate a fast and efficient export licensing system that facilitates responsible exports while imposing the minimum regulatory burden on legitimate business.

[Philip Davies in the Chair]

The approach of case-by-case assessment that I have set out remains, I believe, the most effective way of balancing those concerns. There are often difficult decisions to make, but we follow a well established procedure for each application and make the best possible assessment based on the available evidence at the time. We have a robust, efficient and transparent system that produces rational decisions, but I recognise of course that the world is not static and, when circumstances change in any country, we can and do act.

However, such action—there was one reference to this in the debate—including revoking or suspending licences, is not an admission of failure. On the contrary, the fact that our export licensing system allows us to respond effectively to changing circumstances is, I suggest to the House, a further sign that our system works.

Let me turn to some of the countries mentioned in the debate and then some of the more specific cross-country issues. May I begin with Egypt? Egypt provides an example of our responsiveness and our determination to ensure that our exports do not contribute to internal repression or human rights violations. Following the worsening events in Egypt this year, we conducted a review of extant export licences. As a result, on 19 July, five licences were revoked, as they were assessed to be no longer consistent with the consolidated criteria.

On 21 August—I think this answers the query from the hon. Member for Glasgow North (Ann McKechin) about the month—in response to increasing levels of violence in Egypt, the Foreign Affairs Council of the European Union agreed to suspend all export licensing to Egypt for equipment that might be used for internal repression. That is a lower threshold than the consolidated criteria that we applied, whereby the test is whether there is a clear risk that goods might be used for internal repression. The UK fully supported the Foreign Affairs Council decision and, as a precautionary measure, we applied that suspension to all licences to the Egyptian army, air force and internal security forces. That resulted in 47 extant licences being suspended and a hold placed on new applications for those entities.

As the situation in Egypt has become clearer, we have been able to revert to a case-by-case assessment. As a result, following a further review, on 25 October we decided permanently to revoke seven of the suspended licences, because we then judged that there was a clear risk that the goods might be used for internal repression. A further 24 licences were removed from suspension, because we no longer judged that the goods might be used for internal repression. The remaining 16 licences will remain suspended until we are in a position to determine whether they should be revoked or restored.

I am pleased that we took firm action to revoke licences in July and that our precautionary action in the light of the Foreign Affairs Council decision, at a time when we were considering further unilateral action, allowed time for a proper assessment of conditions on the ground, which in turn means that we can now consider each case properly on its own merits.

I suggest to the House that that is a good example of how a responsive and rational export licensing system operates in a very difficult situation, but I assure hon. Members that the Government will continue to monitor conditions in Egypt and we will keep the terms of the licensing suspension under review. We will continue to assess the situation against the European Union consolidated criteria, taking particular care to consider the nature of the goods and the identity and track record of the end user.

Let me turn now to Syria. The Committees have rightly been very concerned about licences for the export of chemicals to that country. I would like to take this opportunity to state categorically that the Government have done nothing to assist Syria’s chemical weapons programme. Doing so would, of course, be illegal under the Chemical Weapons Act 1996, and there is no evidence that exports from the UK have contributed to Syria’s chemical weapons programme.

As the Committees know, two licences were issued by BIS in January 2012 authorising the export of sodium fluoride and potassium fluoride for commercial metallurgical processes—the treatment of aluminium fittings. Those licences were revoked in July 2012 under strengthened European Union sanctions that the United Kingdom was instrumental in bringing about. The exporter has confirmed that shipments were not made prior to those sanctions coming into force, so no goods were actually exported under those licences.

[Sir John Stanley]

The Minister has come back with the “There is no evidence” response. Will he at least acknowledge that the British Government cannot possibly have any idea at all of what subsequently happened in Syria to the potassium fluoride and sodium fluoride that have been exported there since 2004? That being the case, the Government surely cannot just take refuge behind “There is no evidence”, because they have no ability to track what happens to those chemicals once they have left this country and gone to Syria.

[Michael Fallon]

I was referring to the two licences issued in January 2012 and, as my right hon. Friend will know, no shipments were actually made under those licences.

Let me now turn to the licences that my right hon. Friend is concerned about—the five licences granted under the previous Government, between 2004 and 2010, before the current conflict in Syria began, for the export of sodium fluoride for the manufacture of toothpaste. Those licences were no longer extant at the time of the revised sanctions, but I do have to say to my right hon. Friend that we have no evidence of any diversion to any different end use.

[Ann McKechin]

The Minister will be aware that his Department has disclosed the end-user recipient in Syria and that a number of years ago there were press reports, in The Scotsman and other papers, that that company was a front company for the Assad regime; it is well known that a number of companies that have operated for a considerable time in Syria are front companies for the Government.

On the specific issue of the end user, given that there were those press reports and that I anticipate the Government would have intelligence about that company, why were the export licences granted?

--- Later in debate ---

[Michael Fallon]

The export licences granted between 2004 and 2010 are not something that I can explain or account for and those are the licences that were followed through; that is when the fluoride was actually exported. I cannot now explain why the previous Government took those decisions. What I can say is that the exporters concerned behaved responsibly by applying for the licences. All the licences were rigorously assessed against the criteria to determine that the end users intended to use the products for legitimate civilian commercial activity. We had no grounds to refuse the applications for our two licences, based on the information available and the circumstances prevailing at the time.

Let me turn now to disclosure. I fully understand the Committee’s desire for public disclosure of the exporters’ names, but that raises important questions, as my right hon. Friend the Member for Tonbridge and Malling (Sir John Stanley) made clear. Export licence applications are submitted to my Department in confidence, and it is important that we maintain the integrity of the licensing system by respecting that confidence. In this case, the exporters have made it clear that disclosure could pose significant potential harm to their broader commercial interests—not in Syria, but in other parts of the world—as well as potential risks to their staff. I share those concerns, and we should not take them lightly.

My right hon. Friend has offered to provide the exporters’ names to the Committees on a confidential basis, and I hope that represents a suitable compromise.

[Ian Murray]

I am grateful to the Minister for that explanation, but could he address the attitude of the companies? Are they happy to have their names disclosed? I understand why confidentiality is important for these purposes, and the companies may end up in front of the Committees in a private capacity, but would they be willing to disclose their names voluntarily?

[Michael Fallon]

That is a perfectly reasonable question, and we are, indeed, exploring with the companies concerned whether they would be prepared to give evidence on a confidential basis. I will let the hon. Gentleman have an answer on that when we have one.

I was asked one other question about Syria, by the hon. Member for Glasgow North. She asked about the position of Croatia, but I am not able to answer her straight away. If I may, I will write to her on that—and, indeed, on any other points that I have not been able to answer.

Let me now turn to Bahrain, another country that has been mentioned in the debate. Since the events of the Arab spring, the Government continue to monitor the situation in Bahrain closely. We assess all export licence applications case by case against the consolidated and the national criteria. The assessment considers all those factors, including the risk of the proposed exports being used for internal repression and in any developing internal tensions.

Since February 2011, we have approved a number of licences for the Bahrain air force, navy and defence force where we have been satisfied that there is no clear risk of items being used in human rights abuses or internal repression. We have refused licences for the Bahrain internal security forces where we have not been satisfied about the risk in respect of internal repression.

We reacted quickly to the events of the Arab spring in 2011, reviewing all licences to Bahrain and revoking those no longer in line with the criteria. In total, 23 single licences and seven open licences were revoked.

Let me turn now to Sri Lanka. The hon. Member for Edinburgh South (Ian Murray) made the rather unfortunate suggestion, in what was otherwise a really good speech, that the Prime Minister was somehow prioritising the selling of arms in his recent visit to Sri Lanka. Let me be very clear: during the recent Commonwealth Heads of Government meeting, he was the first foreign leader since independence in 1948 to give the local population the chance to be heard by an international audience. He shone a light on some of the human rights concerns in the aftermath of the recent prolonged civil conflict and demonstrated our commitment to reconciliation and accountability in Sri Lanka.

Again, we assess all export licence applications to Sri Lanka case by case, in accordance with the consolidated and the national criteria. Decisions on Sri Lanka, of course, take into account alleged violations of international humanitarian and human rights law during the military conflict that ended in 2009, as well as the nature of the equipment—in other words, would it be used in a manner inconsistent with the criteria?

Arms exports to Sri Lanka have increased recently, as we have issued a number of licences for weapons and other equipment that will be used by maritime security companies undertaking commercial anti-piracy work. Those ongoing efforts to fight piracy are important for international trade and security. Our assessment of those applications has taken into account the fact that the weapons will be held in secure storage while in Sri Lanka and that the companies are fully signed up to the international code of conduct for private security service providers. The licences that have been mentioned were all for anti-piracy, and they were not supplies to the Sri Lankan Government.

[Sir John Stanley]

Before my right hon. Friend leaves the issue of Sri Lanka, is he really telling us that 600 assault rifles will be deployed by private security companies operating out of Sri Lanka to deal with piracy? There are also a number of machine guns, but what use are they for anti-piracy measures?

[Michael Fallon]

I am happy to write to my right hon. Friend on that, but it is my understanding that the licences are being used for anti-piracy measures, in which we all have an interest. However, if I am wrong about that, and if I can give him further particulars about the use of machine guns in anti-piracy work, I will of course do so.

Finally, on the countries that have been mentioned, let me turn to Israel. A number of Members have asked about the single licence that accounted for nearly £8 billion of cryptographic equipment. The licence was for “equipment employing cryptography” and

“software for equipment employing cryptography”

with a value of £7.7 billion.

The licence was granted in the first quarter of 2013, and it permits the export of equipment and software for building public mobile phone networks in residential areas and for small businesses. Those items are subject to export control because of their encryption—information security—capability. That capability, it must be said, is a standard feature of the mobile phone network. The goods are for purely commercial end use.

Again, we assessed the application against the consolidated and the national criteria. A licence would not have been issued where there was a clear risk that the proposed exports might be used for internal repression or to provoke or prolong internal conflict, or where they could be used aggressively against another state.

I appreciate that the value of the licence appears extremely high and may not represent a realistic goal on the part of the exporter. The exporter has confirmed to us that the value of the licence was based on an expectation of a large number of orders over the two-year validity period of the licence. Given the nature of the goods and the end use, that was not considered to be a particular concern.

Let me turn now to the arms trade treaty, which is a notable achievement; I am grateful to those Members who referred to it as such. It is not an achievement simply of the past year; it has required long and challenging effort, involving work by two successive Governments over seven years. It was a significant achievement for not simply the United Nations, but the United Kingdom—it was an effort that the United Kingdom led.

The treaty will introduce robust, effective and legally binding controls, which will begin to constrict flows of unregulated or illegal weapons. It will require Governments to block transfers of weapons that pose unacceptable risks and to take strong steps to prevent weapons from being diverted into the illegal market. Authorisations of exports will be reported and arms brokering will be regulated. At the same time, the legitimate trade in arms, vital for national defence and security, will be upheld.

For the United Kingdom, the treaty will be relatively straightforward to ratify because we already have a highly developed export control system. The Government hope to complete the ratification in the next few months. We also hope that the treaty will soon achieve the 50 ratifications that it needs to be brought into force. We and our partners are actively lobbying other Governments to encourage them to sign and ratify it as soon as possible. We are providing funding to support states that need to introduce new legislation or regulations to bring their export controls up to the higher standard required by the treaty.

The performance of the Export Control Organisation in the past year is also— albeit on a more local scale—an important achievement to note. Until recently, the ECO worked to two main targets for processing export licence applications: a primary target to turn around 70% of standard licence applications within 20 working days, and a secondary target of completing 95% of those applications within 60 working days.

Year-to-date performance to the end of October on the primary target is 80.2%, which is a further improvement on the 71% achieved in 2012. However, we listened to industry concerns that, although the old secondary target of completing 95% of licence applications within 60 days was being met, that still left a sizeable number—about 850 a year—taking longer than three months to get a decision. In March I therefore announced a new, more ambitious, secondary target of completing 99% of cases within 60 working days, with the aim of further improving the efficiency of the system. Those additional cases, of course, tend to be more difficult and often require additional scrutiny because of their destination, but the performance since July, when the new target came into effect, stands at a very encouraging 98.4%.

Several Members, including the hon. Member for Glasgow North, mentioned transparency. We remain committed to greater openness and transparency in licensing as that provides the means for Committees, the House and the public to hold us to account. At the same time, in generating more information for disclosure, we should not create unnecessary red tape for businesses.

In the most recent initiative, we have sought to increase transparency by requiring exporters to provide us with information about their export and trade activity under certain open licences. While the final preparations were being made for that, it became clear that we had not struck the right balance between the twin objectives of increasing transparency and avoiding unnecessary bureaucratic burdens.

In particular, the Government became concerned that the proposed reporting of each export would put our exporters at a disadvantage in relation to exporters from other countries, notably the United States. Clear evidence emerged that the proposed rules might lead to some of our companies relocating some operations overseas, with negative consequences for British jobs.

[Ann McKechin]

I refer the Minister to the Government’s feedback of July 2012:

“Exporters generally accept the rationale for this initiative and are generally supportive provided that the administrative burden is kept to a minimum and that what they consider to be truly sensitive information is protected.”

The point is the quality, not the volume, of the information, so that people can know accurately what has been sold. Where is the evidence that exporters in the United Kingdom have said at any point that they will take their business elsewhere?

[Michael Fallon]

I am happy to write to the hon. Lady with more evidence to back up what I have said about the fear that some operations might be relocated overseas. She has challenged me on that, and I am happy to write to her in detail.

The Government announced in Parliament on 18 July that we had decided to dispense with some proposals relating to quarterly reporting. As a result, users of open-general and open-individual licences will be required to make reports on their use of those licences annually, rather than quarterly as originally envisaged. They will still have to provide information on the destination country, the type of end user and the number of times the licence has been used for that country and end user type.

Those revised reporting requirements will apply from 1 January 2014, with the first year’s data being published in 2015. All that information is additional to the existing quarterly and annual reports. We are not reducing the overall level of reporting—quite the opposite. We will be publishing considerably more information about the use of open licences than is currently the case.

I think it was my hon. Friend the Member for Beckenham (Bob Stewart) who raised the matter of the register of arms brokers. My right hon. Friend the Secretary of State for Business, Innovation and Skills has decided that now is an appropriate time to look again at the issue of a pre-licensing register of arms brokers. We will therefore be launching a public consultation to help in gathering the necessary evidence to allow the Government to decide whether to introduce such a register. There will, of course, be an emphasis on the relative costs and benefits, alongside the likely effectiveness of such a register. The public consultation is now planned for early next year.

My hon. Friend the Member for Beckenham and, I think, the hon. Member for Llanelli (Nia Griffith), asked about brass-plate companies. The existing legislation would, in certain circumstances, allow enforcement action to be taken against those and their officers, but sufficient evidence is necessary to justify such action. We continue to pursue with other relevant agencies the possibility of using other legislation to discontinue the UK registration of such companies on public interest grounds. I hope that that is helpful. It is a complex issue, which raises difficult questions about the nature of any evidence that may be disclosed in any proceedings. We shall, of course, update the Committees when firm conclusions have been reached.

I was asked by the hon. Member for Edinburgh South about risk profiling. I reassure him that licence applications are reviewed by officials in a number of Departments and agencies. We take account of all the available relevant information. As I have said, we look at the goods, the end user and the risk of diversion. We will of course not grant a licence if that would breach the consolidated criteria. Risk is integral to everything that we do on export licensing.

I was asked about the paragraph 46 ambiguity, and I am anxious not to add to it. I am assured that if there is any confusion, criterion 2 is the policy, but I am happy to write more formally to my right hon. Friend the Member for Tonbridge and Malling on that issue.

[Sir John Stanley]

Before the Minister sits down, will he give way?

[Philip Davies (in the Chair)]

Order. Has the Minister already sat down?

[Michael Fallon]

I have sat down.

[Philip Davies (in the Chair)]

Order. The Minister has sat down, but I can give you the opportunity briefly to close the debate, Sir John.