Register of Arms Brokers Bill [HL] - Second Reading

– in the House of Lords at 11:02 am on 10th June 2016.

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Moved by Baroness Jolly

That the Bill be now read a second time.

Photo of Baroness Jolly Baroness Jolly Liberal Democrat Lords Spokesperson (Defence)

My Lords, responsible and robust arms controls are one of the most crucial ways that we can ensure that the rule of law and the protection of civilians from violence and repression continue to remain a cornerstone of the key principles that hold the international community together. We are committed to the new international Arms Trade Treaty, and we believe it is imperative to tighten our own controls over the arms trade. To that end this Private Member’s Bill seeks to amend the Export Control Act 2002 and mandate the Secretary of State to create a register of arms brokers. It would make the registration last three years, insist on a fit-and-proper test for the individual, and take into consideration issues such as a criminal record, past export control violations, company ownership details and tax status.

Who can be a broker? The answer is quite simple: it could be you or it could be me. It could be anyone. I should make it clear that I am sure many brokers and arms companies do an honest job and do it well. They do not abuse the current system. Although this Bill would include them, they were not who we had in mind when it was drafted. Those playing by the rules should not see this as additional red tape. They also have systems that are routinely audited by BIS. They already keep the necessary records and always register with the appropriate authorities, so a register of arms brokers such as that proposed is no more burdensome on them.

From the outset I have to confess that the world of arms brokering was to me a closed book. My understanding came largely from John le Carré’s character, Richard Roper, in The Night Manager, although those who know about these things tell me that the Nicolas Cage film, “Lord of War” is far nearer the mark. But for a more accessible film, you have only to go to YouTube and look at a Channel 4 “Dispatches” film broadcast over five years ago, entitled “After School Arms Club”. To prove the point that indeed anyone could broker arms, a group of schoolchildren set themselves up as arms brokers for the TV programme. They discovered that someone from the UK could broker AK47s from China to Chad. The guns did not touch British soil and all that was needed was a licence granted by the Export Control Organisation based in BIS—no name and no background check.

The Consolidated EU and National Arms Export Licensing Criteria determine what should be considered in granting a licence, and by and large focus on conditions in the country of final destination and in the UK. Consideration is given to the respect that the country of final destination has for human rights and international humanitarian law, local and regional tensions and conflicts, peace and stability, and its behaviour within the international community. The deal should also respect the UK’s international obligations, commitments and any sanctions of the UN Security Council or EU. In short, is the transaction proposed appropriate for the country of final destination and its region, and does it meet UK commitments and satisfy our interests?

As an aside, looking at some of the deals, noble Lords might be excused for wondering whether the criteria were satisfied completely in all cases. However, there is no requirement to look at the brokers, the pattern of their deals or whether they were using offshore mechanisms in countries such as Gibraltar or the British Virgin Islands. In fact, some of the companies concerned are clients of Mossack Fonseca. Evidence clearly shows that UK brokers have routinely used such offshore vehicles to hide their most damning activities from scrutiny and detection. Nor is there a check on whether a broker has a prior conviction or has previously violated arms trade rules. In fact, there is no need to know anything about the broker whatsoever.

The Commons Committees on Arms Export Controls has repeatedly called on the Government to introduce a register of arms brokers in addition to the existing licensing system. The previous chair, Sir John Stanley, said that the regulatory system for brokers needs to be tightened up. He said that more should be done to create a “proper exchange of information” between all those involved in the regulation of UK-based traders selling weapons domestically and abroad. In 2009, Sir John was part of a delegation to Kiev advising the Ukrainians about their surplus Soviet weapons. To the delegates’ surprise, the Ukrainian Deputy Foreign Minister had some key information regarding the UK. He had a list of UK arms brokers active in Ukraine dealing with the Ukrainian surplus weaponry. This list was handed to Sir John and included end destinations of serious concern such as Libya, Rwanda, Uganda and Sri Lanka. When he passed it to BIS, it appeared to have had no knowledge or sight of the list. The then Foreign Secretary, David Miliband, ordered an investigation which found that eight of the brokers were known to the British authorities and were approved by the Export Control Organisation within BIS. So, who else believes we should have a register?

The UN Arms Trade Treaty recommends a broker register. Furthermore, the Arms Trade Treaty toolkit recommends that prospective brokers could be asked to provide details of: their country of nationality and residence; their ownership of any entity or involvement in any relevant business used to facilitate brokering activities; and the range of conventional weapons that the broker may wish to be involved in brokering. Article 4 of the EU common position on the control of arms brokers recommends a vetting and registration system. Article 5 requires that member states share information on registered brokers, record of brokers and denials of brokers. Article 10 of the UN Arms Trade Treaty requires states to regulate brokering and recommends a system of registration. Article 12 of the EU firearms directive, after its forthcoming review, will require states to verify the professional integrity and abilities of firearms dealers and to ensure that provisions also apply to arms brokers. The UK has chosen to ignore all these requirements for arms brokers.

I have deliberately tried to avoid recent conflicts and recent allegations, concentrating on policy and process, and looking at the criteria for a licence to broker a deal and inaction on the part of successive Governments. I seriously wonder why we resist. I understand the need to reduce red tape but we have set our face against this in an illogical way and, without fail, everyone I speak to is astounded at our inaction in this regard. It would not be ground-breaking; we are doing nothing new. We are not in the vanguard. The US, Australia, Canada and most of the EU states are already there. They operate in a transparent manner, confident in their brokers’ records, characters and financial deals. They are able to share intelligence and can feel some confidence that deals will not allow arms to fall into the hands of regimes, organisations or states and cause death and distress, let alone repression or abuse of human rights.

Registration would bring controls on arms brokers from the UK into line with those for a series of related processes, such as the Section 5 firearms registration process—for UK-based gun deals—and national security vetting for contractors working under UK MoD projects. These systems all require a series of background checks, including on past criminal activity and an assessment of the claimant’s suitability. It is, therefore, illogical that the individuals wishing to broker thousands of small arms overseas are themselves subject to virtually no eligibility testing.

This is a modest measure. As the noble Lord, Lord Empey, said earlier about his Bill it is not perfect and we acknowledge that. But it would not prove expensive—indeed, it should be self-financing. As a nation, we expect registration of our doctors, our lawyers and even our care workers. Surely the time has now come to add arms brokers to the list. I beg to move.

Photo of The Bishop of Derby The Bishop of Derby Bishop 11:12 am, 10th June 2016

My Lords, I rise to support the noble Baroness, Lady Jolly, and to make three simple points about why this such a powerful and necessary case. First, it builds upon existing legislation about licensing and export control, so we have a set of criteria and an assessment process in place so that all companies involved are scrutinised and licensed. We are doing the work that would provide the register. So the principle of identifying and monitoring arms brokers is established.

Secondly, there has been a recommendation from the House of Commons Committees on Arms Export Controls that the Government establish a register of UK arms brokers. So besides having a principle of identifying and licensing brokers, even in our own parliamentary system there has been some expert scrutiny of that principle and a recommendation that it is taken forward to a formal system of registration.

My third point comes from my recent experience of being involved in the crafting and implementation of the Modern Slavery Act, both on the Joint Select Committee and as it now unfolds. In the language of that world, which is analogous, there is the issue of what is called supply-chain transparency: how people trade and make it transparent for the benefit of all concerned, pushing back against temptations towards corruption.

We all know that there is pressure on business for low margins and quick wins. There are fast-moving economic transactions that are blurred by the complexities of crossing the boundaries of different jurisdictions. In all that complexity, there is enormous opportunity for serious crime, which is one of the most powerful economic disturbers and causes of enormous upset on the international stage. We have to have ways of being vigilant in order to identify and challenge corrupt and illegal practice and to create the space for good practice to develop. That requires, I think, public identification and registration of companies so that they can be properly accountable. When you have a registration system—as we are trying to establish with companies about employment and the fight against slavery—it allows people to name, compare and be proud of good practice. Companies can benefit by being part of a registration system and showing that they want to be models of good practice.

I am sure that arms brokers, like many industries in a complex, international world, will be subject to the temptations, pressures and opportunities that serious crime presents. Certainly, with the fight against slavery, we find that the more there can be public identification and accountability of operators, the more chance there is of consolidating good practice, identifying bad practice and pursuing those responsible for it in a proper way. I think that we owe that to our Government and our citizens, and I hope that this Bill will make good progress.

Photo of Baroness Smith of Newnham Baroness Smith of Newnham Liberal Democrat 11:15 am, 10th June 2016

My Lords, I welcome the Bill brought forward by my noble friend Lady Jolly. The excellent speech with which she introduced it means that very little needs to be added, so I shall keep my remarks relatively short. This is a very important initiative. Indeed, it is rather shocking that we do not already have such a register. The idea of introducing the concept of a fit and proper person test seems entirely appropriate.

In an excellent debate in your Lordships’ House yesterday on the relationship between the Executive and Parliament, there was much discussion about the nature of draft legislation going through Parliament in recent years, in particular the fact that draft Bills have shifted from being about 24 clauses in length to 49 clauses. This Bill is admirable in being remarkably brief, with just two clauses. It is very clear and the proposals that it contains reflect a judicious balance between appropriate controls versus undue bureaucracy. A three-year period of registration—rather than, say, a one-year period, which might be too restrictive and overly bureaucratic for arms brokers, or a five-year period, which might not give adequate safeguards—seems to be exactly the right balance. It is relatively light-touch, but it is also hugely important. It would help the United Kingdom to engage internationally in reducing the risks of illicit arms brokering, something that we clearly would not support.

As Amnesty International and Saferworld have argued, there is a risk at present of arms brokers operating under the radar, beyond the knowledge and reach of UK export control enforcement. That is surely something that we should be trying to avoid. This is particularly important at a time when there are so many non-state actors seeking arms and armaments for terrorist and other activities. It is hugely important that we, as the United Kingdom, make greater efforts to ensure that illicit arms brokering cannot occur or, if it does occur, that we act against it.

This is not an attempt to limit the activities of bona fide arms brokers. It is a way of taking responsibility to avoid illicit activity. I am aware that the consultation in 2014 saw defence industries in particular saying that they were concerned about a register and that it might be overly bureaucratic. We should be clear that this Bill does not aim to work against defence industries—bona fide industries should have no problems getting registered—but it should work against those who are working illicitly, often registered with businesses offshore. It would improve the ability to oversee things without being overly bureaucratic.

I hope that the Minister will be able to take this Bill and work with it. I am aware that Governments are very often reluctant to take Private Members’ Bills, but as my noble friend and colleague Lady Jolly has been nearly as successful as the noble Lord, Lord Empey, in coming so high in the ballot, I very much hope that Her Majesty’s Government will be able to work with this Bill, because, as my noble friend has asked, why have successive Governments resisted an arms-broker register for so long?

Photo of Viscount Waverley Viscount Waverley Crossbench 11:19 am, 10th June 2016

My Lords, I, too, thank the noble Baroness for outlining her Bill in the manner in which she did. My only experience in such matters is having specialist friends who have always complained about having a tough time being issued with the necessary licences.

I have come to the conclusion, with regret, that this Bill is not for now. First, there appears to be a consensus in this House that there is generally too much legislation. Should there be issues that require attention, it is preferable to address these through clarification and interpretation of existing legislation. Secondly, the Bill would add further burden to the criminal justice system.

It is my understanding that a UK register of brokers has been on the table for some time but was quietly dropped by the then Secretary of State. While I recognise that the use of agents or brokers is often a legal requirement in many countries in order to reduce corruption—by imposing a barrier between public officials, military and police officers, and the supply chain, whose representatives are perceived as the principal drivers of such practices—the UK industry is already controlled by the ECA, the licensing system and the Bribery Act. In addition, the UK’s defence and security industry has undeniable respect worldwide as a driver for innovation, manufacturing excellence and other added values, including reputational.

If the result of the upcoming referendum vote is to remain, would it not be better to co-ordinate this with our European competitors to ensure a level playing field? I listened carefully to what the noble Baroness, Lady Jolly, said about the European-wide arrangements, but I disagree somewhat in that there is a register that has the effect of including the players in it. Therefore, I suggest that we do this in unison with our European Union partners. Conversely, if the outcome is to leave, we will require all the comparative advantages that can be mustered.

In conclusion, I feel unable to support the Bill, since a public register would also be seen as a security risk. Its effect would probably lack enforcement follow-through and would cause damage to trade competitiveness for no perceptible benefit.

Photo of Lord Stoneham of Droxford Lord Stoneham of Droxford Liberal Democrat 11:23 am, 10th June 2016

My Lords, I am very pleased to join my noble friends Lady Jolly and Lady Smith in advocating support for this Bill. The noble Viscount has just put what I thought was going to be the principal argument of the Government: that licensing is adequate and that they have a complete aversion to needless regulation. I, too, have an aversion to that, but I have to ask: is the problem easing and getting better or is it becoming more complex, more illicit and therefore more dangerous, both in this country and internationally?

I know, having spoken in this Chamber many times with the noble Baroness, Lady Neville-Rolfe, that the Government are prepared, when they think they have a problem, to consider extra regulation. I did not think there was any need at all for the extra regulation that they introduced on trade unions, but they were quite prepared to do it. But this situation seems to be a critical national interest, so we should give it attention.

The Government have to ask themselves the following questions. Will they be open to blame if they have not done all in their power to regulate arms dealing? Is this problem becoming more difficult because of mobile technology such as drones and therefore it is more immediate that we have closer regulation? Do they have absolute confidence in licensing, where the onus is on investigating the country of destination and not giving the scrutiny we think they should be giving to the backgrounds of people involved in these arms deals and their operations, and doing a proper test of fit and proper people?

The Government have to answer four key arguments. First, they have to argue that we do not need these controls and that the problem is not becoming more complex. Secondly, they have to ask themselves: why do we require similar processes in this country when we are talking about the Section 5 firearms registration process for UK-based arms dealers? Why do they require a process of registration for national security vetting for contractors in the MoD? Are we saying that arms brokers internationally should not be aligned with these processes? It is illogical that individuals brokering overseas arms deals are not subject to an eligibility test. Therefore, the Government have to say why that is the case. Are they confident that they have the processes in place to safeguard public and international interests?

Thirdly, all the evidence is that illicit arms dealing is often associated with offshore tax avoidance. With their efforts in that area of tax avoidance and arms dealing, the Government have to ask themselves: would a registration process actually help deal with both problems that the Government should be concerned about?

Fourthly, the Government have to answer the question posed by my noble friend Lady Jolly: why does a registration and licensing system operate in countries such as the USA, Australia, Canada and 18 EU nations? We may have difficulties, as the noble Viscount, Lord Waverley, said, with regard to the exact details of those, but should we be trying to align those processes? It makes sense for us to learn from those processes. The Government have to ask themselves: why are those processes suitable in those countries, and would similar processes not help the exchange of information between these vital nations?

This issue is becoming more complex and illicit, and the Government need to consider action beyond simple licensing to deal with it.

Photo of Viscount Waverley Viscount Waverley Crossbench

My Lords, if the noble Lord will allow me, there is much in what he said in his last substantive point that I agree with. I apologise to him that my mind wandered just a little at a key time. It is particularly in relation to Section 5, which I heard him refer to, where there is a tough regime where these friends of mine have difficulty in getting the appropriate licences, or at least they have to put their case very firmly through the normal channels.

Photo of Lord Judd Lord Judd Labour 11:28 am, 10th June 2016

My Lords, I warmly congratulate the noble Baroness, Lady Jolly, on having brought forward this very important Bill. It is not a little Bill; it is a Bill of immense significance. It is good to follow the noble Lord, Lord Stoneham. We all wish him and his family well with the arrival of the new grandchild.

It is always a bit difficult to say this—it seems like boasting or something—but my life experience has totally convinced me of the importance of this issue. When I talk about my life experience, I have until recently been a trustee of Safer World, I am a one-time chair of International Alert, and of course I worked with Oxfam, VSO and others over quite a number of years.

Significantly, I also look back to my ministerial days, when I had the privilege of serving at defence, overseas development and the Foreign Office. My experience in all those parts of my life convinced me of the significance of the issue with which this Bill is dealing. I do not see how you can have a relevant, effective and convincing foreign and security policy unless your disarmament policy, and your objectives within the context of that policy, are prominent. Furthermore, the arms trade and arms sales must have priority consideration in that policy. My own view is that, with arms as desperately lethal as they are now and with the degree of instability in the world, we should really only ever export arms to our allies or to close friends that can be trusted, and for a specific purpose. They are not just another product to be exported; they are the means of death and slaughter.

We all know the problems in controlling end use and the rest, when sales take place. The closest monitoring is therefore vital. It is also why the arms trade treaty was so important, as a beginning. I try not to be a cynic in my old age but what I worry about, looking back at my own ministerial days, is that there is always an element of tokenism floating around. We may have great celebrations in the Foreign Office to welcome the arms trade treaty, but does that treaty indicate a real and serious priority commitment in foreign policy to the importance of this work, or is it something to have on paper as our theoretical position, with in practice a minimalist approach to its application? That is why this Bill becomes such an important contribution to the right solution.

It is naive to suppose that arms cause conflict, but when I look back to my Oxfam days, 25 years ago now—it is difficult to imagine that when it is all so vivid—I used to be dismayed by the amount of our work which was affected by conflict. Well over 50% of it in parts of the world was dealing with the consequences or the immediate effects of conflict. How can you talk intelligently about your commitment to development and humanitarian priorities if you do not see this issue as central? But conflict starts in the minds of people; what would be naive is to suppose that arms cause it. They do not. People cause conflict. It is very easy in some situations—one thinks of Rwanda and Burundi in the past—for handmade weapons to be used to terrible effect. The availability of weapons, particularly given their modern potential for destructiveness, is a dangerous element amid all this instability and unpredictability.

Of course, the arms issue becomes as important as ever when we consider the deep political and strategic issues involving Russia, China and the rest. But what is happening on the ground in much of the world, where there is immediate killing and slaughter, is the result of local and regional conflicts in which a small number of people can cause havoc and appalling suffering. That is why it would be unthinkable not to take this Bill seriously and see it as much needed. I congratulate most sincerely the noble Baroness, Lady Jolly, and her supporters on having given us the opportunity to start taking our responsibilities as seriously as we should.

Photo of Lord Stevenson of Balmacara Lord Stevenson of Balmacara Shadow Spokesperson (Business, Innovation and Skills), Opposition Whip (Lords), Shadow Spokesperson (Culture, Media and Sport) 11:35 am, 10th June 2016

My Lords, this has been a very good debate and I, like others, congratulate the noble Baroness, Lady Jolly, on coming so high in the ballot that she has been able to introduce this Bill. In private conversation with me before today she mentioned that she was doing this because it was a sort of stick to try to encourage the Government—perhaps she had in mind a herd of cattle, but that would be an unkind thing to say about the Government—towards a solution for which they already have the powers but which they seem reluctant to take forward. In a sense, that was the tone she set with her speech. It was not a speech of high rhetoric or overzealous comment but made a measured and good case which, as I understand it, seeks to seal up a little more securely our procedures in this rather difficult area. All the speeches we have heard so far have been along these lines, with a touch of emotion from my noble friend Lord Judd—but justifiably so from his experiences, which bring us back to the rather important point that the Bill deals with death and destruction, not fluffy toys. We should always have that at the back of our minds as we go forward to consider it.

My concern here is not so much to re-emphasise the well-made points about how the Government appear to be standing out against what is becoming a common approach in the world. That is not only to provide a detailed examination of those companies and individuals who wish to participate in this trade but to do so in the context of a wider understanding of the market, and thus necessarily having a pre-licensing procedure. It is not at all clear to me why the Government have taken their view. I will come back to that point but I also wish to put it in a wider context and will therefore start my remarks with a rather broader take on this issue.

From this side of the House, we accept that developing and maintaining a thriving global trade in goods and services, including defence materiel, is a vital component of modem life and that it underwrites our economic and social benefits. We should be very careful about attacking it. However, the direct impact of the operation of individuals, companies and states has not always worked to protect human rights, nor afforded protection to those affected by acts of commission or omission by those involved in these trades. Increasingly, we hear the argument that respecting human rights is good for business. We are grateful that it is gaining wider acceptance but it is still not the default position. Indeed, it is not uncommon to hear it argued that there can and should be a policy trade-off between business on the one hand and human rights on the other. That is simply not the case.

I accept that the UK now has one of the toughest export regimes in the world, particularly in defence materiel. The previous Labour Government were part of that process. However, the sales of military equipment have always raised moral and ethical issues, as my noble friend Lord Judd mentioned, and recent experiences such as the Arab spring and the fallout from it have pointed out difficulties even with our existing systems. If we are to make progress on this, we not only have to focus on the broader policy context but continue to work with companies to make the case for a respect for human rights in what they do. In preparation for a previous role in the party, while trying to develop a broader context for business and human rights and the relationship with how trade operates, I talked to companies which understand that by involving themselves in human rights, they will help to protect and enhance their brand as well as protect and increase their customer base, as customers are increasingly seeking out ethical companies. It also helps the companies themselves attract and retain good staff, contributing to lower rates of staff turnover and therefore higher productivity, which we desperately need. It reduces risks to operational continuity resulting from conflict inside the company itself, such as strikes or other labour disputes, or with the local community or other parties with which they might wish to trade. That goes under the common term “social licence to operate”, which is very important and increasingly so these days. It appeals to institutional investors, including pension funds, which are increasingly taking ethical factors, including human rights, into account when making their investment decisions.

This is a trend which we need to anticipate and work with. Government has a role to provide clear policy statements around this, and where the Government fall down at a particular level, that will interrupt the progress that we are seeing. Companies have told us that they need policy coherence and clear and consistent policy messaging from the Government. Where that consistency is faulty, there are problems.

I have looked at the Government’s recent consultation on this, which has already been mentioned. I am very confused about it. It is easy to criticise government consultations: sometimes the methodology is strange, while sometimes it is not so much the methodology but the reporting that is difficult. In this case, it is both the methodology and the response. This was a six-week consultation carried out in April and May 2014. It was not a very large one, as it was admitted in the government response that it would not be.

It admits from the very start—I would be grateful if the Minister could comment on this when she comes to respond—that there were two completely different viewpoints. A group of people from the industry responded—some 70 or so responses were received from industrial companies—who were broadly against any further red tape or burden of regulation. Well, they would be, wouldn’t they? A smaller number of respondents—in my view, probably equally vociferous—wanted to make the case that we have heard today, advocating the benefits of a comprehensive registration system based on thorough vetting, eligibility and an assessment criteria in order to act as a preventive measure to guard against undesirable broking activity.

It does not take a very long time to come to the conclusion that where you have a bifurcated response, you are not going to find a consensus, so it is not unreasonable for the Government to respond that it was not possible to find any consensus view. They say that there were,

“no … sufficiently powerful arguments in favour of implementing a comprehensive register”, but they do not give the detail of what those arguments would be. It is a little unfair of a Government to say that they had a vision in mind of a comprehensive response to the question they were asking, but that since it did not come—or nobody actually wrote it out in the terms that they had envisaged it—the argument was not sufficiently convincing. I do not think that that is sufficient for a government response.

The Government go on to say that they have concluded that,

“introducing a register would not be sufficiently beneficial so as to justify additional regulation of legitimate UK businesses”.

Again, however, they do not give the details of what would be sufficient.

They then fall back into the problem, which I think we have heard about, that assessing on a case-by-case basis does not give the broader context that other countries and partners of ours seem to feel is necessary and so distances us from them. The Government respond with what I think must be the weakest argument I have ever seen:

“continuing to maintain the status quo of case-by-case licensing assessment is compatible with Article 10 of the Arms Trade Treaty, which requires countries to regulate arms brokering but does not stipulate the means of doing so”.

Well, that is great. That is such a terrific tick in the box. It did not stipulate it, therefore we do not have to put it down. The response continues:

“The Government is not convinced that the introduction of a pre-licensing register would substantially enhance the enforcement of brokering controls and that it would place considerable extra burdens on legitimate defence companies”.

Well, we did not get those, and we do not know what those extra burdens would be. Indeed, the argument has been made today—which we should listen to—is that, yes, there are additional burdens, but regulation of itself is not bad. Good regulation makes markets fair, opens up issues for consumers and makes our commercial operations better than they would otherwise be. We must be mature about this and not simply have the knee-jerk reaction that regulation must be bad. It is not always bad; it can be very good. The case I have heard today has been utterly convincing that this is a good set of regulations which would be appropriate for this situation. If your Lordships have any doubts at all about why this might be appropriate, they should look at the list of respondents in the government response. There were 78 responses to the call for evidence, and of those, fewer than one-third were prepared even to have their names listed as having submitted evidence to the consultation—which, as I said, was not exactly the most searching examination.

A pre-licensing system seems to me to be a missing link in an otherwise pretty good system, but as we have heard, there are gaps. We would only be moving to the point where other countries have already moved to, and we would be responding to those of us, particularly people such as my noble friend Lord Judd, who feel that the present arrangements, although good, are not reaching out as far as they could do in a way that would make this a more effective system even than it is at present. Good companies should not fear transparency. If they are already supplying in other parts of the world, they are probably already doing this with other Governments. We should not be seduced by the idea that this is somehow an exceptional burden. As I have said, even if it is a burden, we must avoid the knee-jerk reaction of saying that regulation is bad. I wish the Bill well.

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe The Parliamentary Under-Secretary of State for Culture, Media and Sport, The Parliamentary Under-Secretary of State for Business, Innovation and Skills 11:46 am, 10th June 2016

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, and 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.

Photo of Baroness Jolly Baroness Jolly Liberal Democrat Lords Spokesperson (Defence) 11:59 am, 10th June 2016

I thank the Minister for her reply, which I shall come to in a moment, and other noble Lords for their contributions to this excellent and important debate. I should not finish without thanking the Library for producing its briefing and Amnesty International and Saferworld for theirs, as well as expressing my gratitude for the support—in a sense—of the Minister and her officials, who found time in a busy schedule to meet me, and to all those who have given me encouragement.

The right reverend Prelate the Bishop of Derby, whom I thank for his support, talked about the Modern Slavery Act, and the parallels there, which was really quite interesting. He talked about supply chain transparency, which is very much what the Bill is calling for. With modern slavery and arms-broking, when things are done illegally, you have the opportunity for crime, but also for people to make very big money. That is one of the issues here. He also mentioned good practice. One thing that we would call for is for training for arms brokers in various instances, so good practice can be exemplified.

My noble friend Lady Smith of Newnham talked about a fit and proper person. We should not really baulk at fit and proper people. FTSE boards are now called upon to have fit and proper people sit on them, and you cannot be a charity trustee without being deemed fit and proper. Arms brokers should not be excluded from that.

The noble Viscount, Lord Waverley, made some interesting points about his colleagues and friends being given a tough time. I hope that it was not too tough, but these are serious things that are being considered. Questioning needs to be done and, if they were given a tough time in getting their licence, I would not apologise for that—I would say that was absolutely appropriate. Not all British brokers are whiter than white.

There was the government consultation, to which both the noble Viscount and the noble Lord, Lord Stevenson of Balmacara, referred. It was published, or put up on the website, with no announcement that it was there—it just suddenly appeared; then, all of a sudden, the whole thing was dropped. So the consultation was started under the coalition, and the new Government caused the whole thing to disappear. Perhaps the noble Lord and I are not too far apart and, if this Bill is to proceed, we might share some thoughts over a cup of coffee.

My noble friend Lord Stoneham of Droxford gave the Minister four pointers. She might reflect and have a look at Hansard with her officials afterwards to see whether they might be applied.

I give many thanks, too, to the noble Lord, Lord Judd, who has given me a lot of support. I really value having on my side a renowned and doughty campaigner—but, not only that, an experienced and expert parliamentarian. He flagged up the relationship between foreign policy and the arms trade. That is really critical; the arms trade and brokering arrangements have to reflect the Government. The eight criteria go some way towards that but, when one looks at some of the deals that have been made, one questions how those criteria have been met. It looks as if they might have been shoe-horned. He talked also of transparency, and we do need that in this trade; we do not need muddy waters.

The noble Lord, Lord Stevenson of Balmacara, talked about a conversation that he and I had in advance—and I must be careful next time when I talk to him before going into a debate on a Bill. I do not recollect talking about cattle, but there we go. I might have used the expression, “a stick”. He talked about death and destruction, and at the end of the day that is what these deals can produce—not fluffy toys. I am not a pacifist; there are times when arms are absolutely appropriate, but they have to be absolutely appropriate, and we must not forget that people have human rights. Very often, arms—not just weaponry but other things that come under the list—seriously infringe people’s human rights, and abuse them. We need trade, but we need legal trade deals, and it is important that that is the case. We need to be absolutely clear that the people undertaking these deals are the sort of people who we feel should be doing it.

Human rights should be good for business. On Monday afternoon, I am meeting ADS, which fully understands the need for human rights—it is up for this and understands this. But there are a few unscrupulous brokers, for whom the concentration is not on the human rights but on the money; we are not talking about hundreds but about tens of people, and maybe fewer.

I have been used to calling the Minister my noble friend, and we are still friends—and I come to her response. The noble Viscount, Lord Waverley, made the point about drafting Bills; it is for experts, and we are not experts in drafting. That is not our area of expertise but, with the assistance of officials, I am sure that we can come up with fit and proper amendments in Committee.

We need to talk about evidence of harm, which I deliberately talked about only from a policy perspective. I have seen a catalogue of harm, which I could have brought before the House if I had chosen to. I chose not to, partly because of time and partly because I did not want to get muddled or muddied, but I can give noble Lords chapter and verse. I am sure that the Minister will have seen some of it as well.

The Minister outlined the eight criteria, but I question some of the decisions that must have been made. I would like an opportunity to talk to people who make decisions based on those criteria, and how they fit in. The committee recommendations to which she referred went back to 2007. The Commons arms committee has more recently been much more vociferous on this matter.

It is sometimes up to a Government to make a decision. The Minister made the point that there was no huge enthusiasm for this particular measure or move in the consultation, but it is up to a Government to make decisions that people will sometimes not be happy with. We make decisions because it is the right thing to do. I think that this is the occasion. In talking about small numbers, the Minister in a sense made my argument; there is no need for huge numbers—it is the right thing to do, so please do it. I would be grateful if she could meet me afterwards, perhaps with the Minister, Anna Soubry.

Bill read a second time and committed to a Committee of the Whole House.