Export Control Bill

Public Bill Committee, 18 October 2001.

Standing Committee B

Clause 10 - Interpretation

Robert Key (Conservative, Salisbury)

I beg to move amendment No. 50, in page 6, line 30, leave out subsection (5).

When I read the excellent explanatory notes prepared by the Department of Trade and Industry and the Department for Culture, Media and Sport, I observed that no explanation was offered for the clause. Apparently, it was a simple omission from the explanatory notes. That always rings alarm bells and one wonders why the Department has decided not to explain the clause. Of course, it is rather obscure. Subsection (5) is all about whether technology is controlled technology.

Incidentally, having referred on Tuesday to the length of a piece of string, I suppose it was inevitable that someone would ask me: ``Why 600 ft?'' It is quite simple, and I had better complete this point or people will never stop asking me. In fact, controlled technology is relevant as 600 ft is 100 fathoms, and 100 fathoms was the length of cable required to anchor a man-o'-war in the average depth of the English channel, which is 30 fathoms. That is the answer to the 600 ft question. However, I digress slightly. That explanation of the question ``how long is a piece of string?'' is almost as obscure as subsection (5). I tabled the amendment, as I could not for the life of me see the point of the subsection. I should be grateful if the Minister would now enlighten us.

Nigel Griffiths (Labour, Edinburgh South)

As the hon. Member for Salisbury (Mr. Key) said, the purpose of the amendment is to leave out subsection (5). The key point is that the definition of controlled technology is necessary to allow us to introduce proposed controls on technical assistance intended for weapons of mass destruction and related missile programmes. Technical assistance, to which controls can apply, will be that which is provided abroad for controlled goods and technology. The goods or technology to which assistance is provided will also be located abroad. Subsections (4) and (5) explain what is meant by controlled technology when it is held by a person, or at a place, outside the United Kingdom. Subsections (2) and (3) do the same for goods. Subsection (4) provides that controlled technology is that which, if transferred from the UK, would be subject to control. Subsection (5) allows an assessment of whether technology outside the UK is to be controlled based on the same considerations that would apply if it were transferred from the UK. That ensures that controls on technical assistance abroad can take into account the use to which the assisted technology will be put and to whom it is provided, as well as the type of technology in question. That is necessary where controls are determined by the end use of the technology.

I realise that that is a very technical point but it is an important one because, as I explained on Tuesday, we need to be able to implement controls on the provision of technical assistance to weapons of mass destruction and related missile programmes in order to implement the European Union joint action. In view of that explanation, I invite the hon. Member for Salisbury to withdraw his amendment.

Robert Key (Conservative, Salisbury)

I am grateful for that concise explanation, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 10 ordered to stand part of the Bill.

Clause 11 ordered to stand part of the Bill.

Clause 12 - Orders

Malcolm Savidge (Labour, Aberdeen North)

I beg to move amendment No. 7, in page 7, line 6, leave out—

`an order under section 1 or 2 which contains any provision made by virtue of section 3(2)'

and insert—

`(a) an order under section 1 or 2 which does not contain any provision made by virtue of section 3(2); or

(b) an order under section 4, 5 or 15(3)'.

Joe Benton (Labour, Bootle)

With this it will be convenient to take the following amendments: No. 25, in page 7, line 6, leave out—

`or 2 which contains any provision made by virtue of section 3(2)'

and insert—

`, 2, 4, 5 or 15(3)'.

No. 8, in page 7, line 14, after `order', insert—

`under section 1 or 2 which contains any provision made by virtue of section 3(2), or an order'.

No. 9, in page 7, line 17, leave out subsection (5).

Malcolm Savidge (Labour, Aberdeen North)

As with all my amendments, these are probing amendments and they hang together. Clause 12 is welcome, as it will ensure parliamentary scrutiny of the secondary legislation--that will be a statutory requirement. The Committee must agree that that is welcome.

Clause 12 provides for three levels of scrutiny for different areas of secondary legislation. The most stringent is the affirmative procedure, whereby a statutory instrument comes into force only if both the House of Commons and the House of Lords approve it. That will apply to all measures, although purely financial measures would, of course, be a matter for the House of Commons only.

The second most stringent level of scrutiny is the delayed affirmative procedure, whereby a statutory instrument must be approved within 40 days of being laid before Parliament.

The third most stringent level of scrutiny is the negative resolution procedure, whereby the statutory instrument comes into law, but can be nullified if a motion is passed against it in either House within—usually—40 days.

It is clearly in the interests of good government that we should have the most thorough parliamentary scrutiny. That is not just in the interests of Back Benchers of whatever party, but is in the interests of the Executive, provided that the Opposition do not cause inordinate delay or unreasonable instruction.

So that the Committee can understand this somewhat convoluted set of amendments, I shall explain their effect in the simplest possible terms. The statutory instruments that currently would be dealt with under the second most stringent level of scrutiny—the delayed affirmative procedure—would be moved up to the most stringent level of scrutiny—the affirmative procedure. The statutory instruments that would be dealt with under negative procedure would be moved up to the delayed affirmative procedure. As no statutory instruments would be dealt with under the negative procedure, subsection (5) would no longer be needed, and would, therefore, be deleted.

As I have said, the amendment merely probes. The idea is to give the Committee the opportunity to discuss the level of scrutiny that is required. The hon. Member for Salisbury referred to that when we discussed clause 6. I hope that it also gives the Minister the opportunity to consider further what levels of scrutiny are appropriate for secondary legislation under the Bill, and to explain his thinking to the Committee.

Vincent Cable (Liberal Democrat, Twickenham)

I shall say just a few words in support of the amendment. The legal eagles may have noticed that my amendment has become rather redundant, as amendment No. 11, which originally referred to it, was withdrawn. I shall, therefore, speak in support of the hon. Gentleman's amendment, rather than my own.

He briefly and cogently made the point that all parties are interested in having good and appropriate parliamentary scrutiny. That was the spirit of the Quadripartite Committee, and both sides expressed the opinion that the Bill should proceed in that way. My interpretation of the amendments is that they would ratchet up the level of parliamentary scrutiny, so that delayed affirmative action would become affirmative, and negative action would become affirmative in all cases. I am sure that the hon. Gentleman is in no way trying to obstruct Government business. This is simply an attempt to enhance the role of Parliament in these proceedings in a carefully thought through way.

It is not clear why clause 6 is not dealt with affirmatively. That seems a little arbitrary; perhaps the Minister could explain that. When we debated the issue on 17 July, I introduced amendments on increasing parliamentary scrutiny. The Minister told me that

``any orders made for reasons that fall wholly or partly out with the purposes must be approved by Parliament by the affirmative resolution procedure. That means that any orders made under the subsection would cease to have effect if not approved by both Houses of Parliament before the end of a 30-day period.''—[Official Report, Standing Committee B, 17 July 2001; c. 28.]

I understand that it is a 40-day period, but he may have made a slip of the tongue, since I assume that he was not improvising policy as he spoke. I hope that he clarifies that point.

Vera Baird (Labour, Redcar)

I support the spirit of the amendment, which probes the issue of the parliamentary scrutiny given to the Bill. The amendment would crank up the level of scrutiny provided for in the original drafts by a notch. That would allow the negative procedure to drop off the bottom, since it would no longer be applicable. Negative procedure does not require any debate in the Chamber, or even a significant amount in Standing Committee.

Members on both sides of the House have expressed great interest in the Bill. I re-read the Second Reading debate last night, in which many highly formed opinions were expressed. The nature of the subject demands that the Bill be laid down in skeleton form, with the meat provided by the statutory instruments. We should reconsider excluding the negative procedure from such applications. The amendment may not be relevant since clause 6 no longer stands part of the Bill, but I support the wish to probe Government thinking on levels of scrutiny.

Robert Key (Conservative, Salisbury)

When we discussed clause 6, I drew the Committee's attention to the fact that if the clause were removed, the House would have less insurance on decisions on the subject. That was my one concern about striking out the clause. The Minister confirmed that danger. He said:

``The hon. Gentleman is correct in his observation that orders under clause 6 would be subject to affirmative resolution procedure and that that will no longer apply if clause 6 is removed.''—[Official Report, Standing Committee B, 16 October 2001; c. 121-22.]

The House has an interesting opportunity to exert its authority, choose affirmative resolution, and ratchet up the procedure from the negative resolution to the delayed affirmative procedure. There is agreement across the Committee that that is a good idea. That is why I agreed to drop clause 6; I said that we would have another opportunity to discuss the issue later. For that reason, I warmly support the amendments and think that they should be agreed to.

The House is going through an interesting phase in which it is losing authority to the Executive. I wish to resist any further such losses, and promote opportunities for increasing the authority of the House over the Executive. That is why I support such a touchstone amendment.

Nigel Griffiths (Labour, Edinburgh South)

I am grateful to my hon. Friend the Member for Aberdeen, North (Mr. Savidge) for setting out the difference between negative and affirmative resolutions so clearly. Our discussions show the great value of scrutinising such legislation. I would like to set out the reasons why we apply negative, rather than affirmative, resolutions, since that would answer the questions put to me.

The amendments would ensure that orders made under clauses 1, 2, 4, 5 and 15(3) are subject to the delayed affirmative resolution procedure; and amendment No. 8 would subject orders under clause 3(2) to the draft affirmative resolution procedure.

I remind the Committee that the Import, Export and Customs Powers (Defence) Act 1939 makes no provision for parliamentary scrutiny of secondary legislation. To that extent, we have a landmark Bill before us. I should also like to make the general point that the provision made under the Bill for the parliamentary scrutiny of orders reflects the distinction between orders that change the fundamental purposes for which export controls can be imposed and those that set out the details of the controls. When the fundamental purposes of the Bill are at issue, it is right that Parliament should have the opportunity to debate such matters under the affirmative resolution procedure. However, the details of the controls are, in our view, best dealt with by the negative procedure.

Most orders to be made under the Bill for which the negative procedure is provided will be predominately technical. Indeed, that point was well made by the hon. Member for Aldershot (Mr. Howarth) on Tuesday, when he referred to the technical nature of much of the secondary legislation given in the dummy orders. The most frequent need for amendment is as a result of changes to lists of items subject to control. Such changes are usually caused by alterations to international export control regimes, such as the missile technology control regime, on which most of our export controls are based.

The dummy orders illustrate the detailed nature of the orders to be made under the Bill, and are the type of orders for which the negative resolution procedure is best suited. Orders to be made under clause 15(3) relate to transitional arrangements in connection with the coming into force of the Bill. We understand that Parliament will quite rightly have an interest in the new controls to be introduced under the Bill, which is why we have provided the Committee and Parliament with copies of the dummy orders. Our commitment is to have full public consultation on draft secondary legislation, which will provide everyone with an interest the opportunity to consider and comment on new controls introduced under the Bill.

Amendment No. 8 seeks to alter the affirmative resolution procedure that we have already provided under clause 12(2) for orders made under clause 3(2). The intention is to require the Government to submit draft orders under clause 3(2) to Parliament first; we intend also that the powers conferred under that subsection should not be applied until parliamentary approval has been given. Although we accept such a procedure for orders made under clause 11, it would not be sensible for that procedure to apply to orders made under clause 3(2). The reason is that the Government will sometimes have to introduce specific controls under clause 3(2) to deal with emergencies. In such situations, the Government will be required to act without delay. It will not always be possible to achieve parliamentary approval in time, although it will still ultimately be left to Parliament to choose by the end of the 40-day period whether to allow the Government to continue to exercise those controls; and that will always be a significant influence on any Government who wish to exercise such powers over that short period.

The reason for affirmative resolution under clause 6 orders was because it contained broad powers to impose record-keeping requirements on companies. Those requirements could have been wide-ranging. However, as I explained on Tuesday, we concluded that we do not need such broad powers after all, because clauses 1, 2, 4 and 5 already provide a narrower but sufficient power for record-keeping purposes. Indeed, that is acknowledged in clause 6(3). Amendment No. 63 to clause 7, agreed to on Tuesday, provides a provision related to record-keeping, simply for the avoidance of doubt.

Clearly, there is no need for maintaining affirmative resolution procedures for the routine record-keeping requirements that relate to the controls that may be imposed under the Bill. The negative resolution procedures for orders containing record-keeping requirements has, of course, always been an integral part of the Bill. The consequential loss of the affirmative resolution procedure in no way diminishes parliamentary scrutiny of orders under the Bill.

The Bill is a significant improvement on the 1939 Act. We are providing for proper parliamentary scrutiny of secondary legislation. We have provided for the affirmative resolution procedure where fundamental purposes are involved and for scrutiny under the negative resolution procedure in all other cases. I hope that that persuades my hon. Friend to withdraw his amendment.

Malcolm Savidge (Labour, Aberdeen North)

I said in my initial remarks that clause 12 was a positive development. I understand the Minister's comments about the 1939 Act: clear parliamentary scrutiny of all the secondary legislation is a positive step. I am encouraged by the Minister's comment that the affirmative resolution procedure will be used for purposes that are fundamental to the Bill, and that most of the cases in which the negative resolution procedure will be used will involve purely technical matters, such as changes in lists. Most of us find that reasonable.

On clause 3(2), we recognise that emergencies would justify using the delayed affirmative procedure. I should stress that the Minister said that most cases would involve technical matters.

Given the strong feeling on both sides of the Committee that we want the fullest possible scrutiny, I ask the Department to give the fullest possible consideration on Report to whether aspects of secondary legislation could be given fuller parliamentary scrutiny. On that basis, I beg to ask leave to withdraw the amendment.

Robert Key (Conservative, Salisbury)

It is unusual to object to an hon. Member withdrawing his amendment, but an important principle is at stake and consideration of it has been put off since our deliberations on clause 6. The hon. Gentleman who moved the amendment is now giving the Government another lifeline by putting the issue off until Report stage. That will not do. The Minister said that his proposals in no way reduce parliamentary scrutiny, but of course they do. If the Government allow only the negative procedure, parliamentary scrutiny will be reduced.

The Minister said that the details would be dealt with under the negative procedure. Does that mean that they are far too difficult for the House of Commons to consider? He said that they would be merely technical. Does that mean that any technical matter is too difficult for the House to consider? He said that he was talking largely about alterations in international control regimes with which we would have to conform. Does that mean that we should not debate such issues more fully under the affirmative procedure?

The Minister said that clause 3(2) contained special controls and related to emergency situations in which the Government would have to act quickly, but that the House would be able to consider matters after the 40-day period. However, we will still not be able to do so under the full affirmative resolution procedure. Once again the influence of the House is being diminished. We are being offered the chance to hold only the minimum possible discussion of any changes.

For all those reasons, we must make a stand. We simply cannot allow the Executive to push the boundaries further. I regret that the hon. Member for Aberdeen, North has sought leave to withdraw his sensible and practical amendment. It would not make a ha'p'orth of difference to the Government's ability to pursue their policies and objectives, but it would give hon. Members sufficient time, in the name of our constituents, to scrutinise what the Executive is up to. That is why I object to the withdrawal of the amendment.

Vincent Cable (Liberal Democrat, Twickenham)

I endorse those remarks. This is not an ideological or policy issue; it is about parliamentary prerogatives and control over the Executive. I agree with the hon. Member for Aberdeen, North that clause 12 is a considerable improvement on what went before; we all acknowledge that. He introduced a gently probing amendment in a constructive spirit. However, I did not sense from the Minister's reply that the Government were listening. There was no suggestion of any movement in future, so it would be appropriate to take the matter further. I shall certainly support the amendment in a Division.

Nigel Griffiths (Labour, Edinburgh South)

I am sorry that hon. Members are not persuaded of the clear difference between the affirmative resolution procedure for the important broad principles of any provision of the Bill and the negative resolution procedure for, as an example, lists of items subject to control. If an item were added to such a list it would be put in the public and parliamentary domain, and Opposition and Government Members would have the opportunity to comment critically on it. They could bring the Government to account at the end of that 40-day period and reprimand them for having made an addition to the list or taken any action under the negative resolution procedures.

The Government are not trying in any way to avoid responsibility for decisions or to keep them out of the public domain. Decisions will be in the public domain and subject to proper parliamentary scrutiny, criticism and all that follows. As the hon. Member for Salisbury will know, having been a Minister, such scrutiny exercises a powerful effect when Ministers consider their decisions or are advised by others on them.

I am sorry that the hon. Member for Salisbury appeared to dismiss the problem of emergency and other situations. He probably did not intend to. Frankly, Governments will have to introduce specific controls under clause 3(2) to deal with emergencies that will often require immediate or prompt action. That action will be put before Parliament. As there is often not time to achieve parliamentary approval before implementation of action, the controls will be in the parliamentary and public domain under the negative resolution procedure so that Parliament can choose at the end of 40 days whether to allow the Government to continue to exercise them, or to stop them, with all the attendant reprimands and proper negative publicity, if it is felt that Ministers have exceeded their powers.

We are talking about the right tools for the right job, in parliamentary terms. To subject all controls to affirmative resolution procedures would have two effects. The first would be to prevent us from taking immediate action in emergencies, and the second would be to cause Members—not Ministers but Back Benchers, I suspect—to have to pore over matters and debate them in the House when only one item had been added to those subject to control.

The negative resolution procedure is the proper procedure for the Bill and this aspect of consideration of matters under it. Under clause 3(2), the procedure will be the delayed affirmative procedure. The provision will give us the right level of control at the appropriate stages, and all that control will be subject to parliamentary scrutiny at some point. I hope that hon. Members will agree to that.

Joe Benton (Labour, Bootle)

I shall now put the question.

Robert Key (Conservative, Salisbury)

On a point of order, Mr. Benton. Can we be quite clear; are we voting on the amendment or on leave to withdraw it?

Joe Benton (Labour, Bootle)

The Committee is voting on the amendment. It takes only one member of the Committee to object to the withdrawal of an amendment, and it then has to remain on the Floor. I am now putting the question on amendment No.7.

Question put, That the amendment be made:--

The Committee divided: Ayes 4, Noes 10.

Nigel Griffiths (Labour, Edinburgh South)

I beg to move amendment No. 65, in page 7, line 14, leave out `6(1) or'.

The Committee will remember that when we discussed clauses 6 and 7 I mentioned the need for this small consequential amendment. Now that the Committee has agreed to the deletion of clause 6, I hope that it will have no difficulty in agreeing to the deletion of a reference to a subsection of a clause that no longer exists.

Amendment agreed to.

Clause 12, as amended, ordered to stand part of the Bill.

Clauses 13 and 14 ordered to stand part of the Bill.

Clause 15 - Short title, etc

Vincent Cable (Liberal Democrat, Twickenham)

I beg to move amendment No. 26, in page 8, line 22, after `overseas territory', insert

`no more than 40 days after this Act is granted Royal Assent'.

Several of the amendments proposed concern issues of substance, and I would not necessarily expect the Government to agree with them. However, this point is technical and is in the spirit of the legislation. It arises from an anomaly that is created by the status of the Isle of Man. We have a customs union agreement with the Isle of Man, so trade flows freely and we cannot exercise export controls over products exported from the mainland to the Isle of Man. However, for historical reasons, the Isle of Man has its own export licensing regime. One can immediately see the potential for anomalies to arise.

The Government would normally deal with such anomalies by bringing in an Order in Council to make the provisions of a Bill of this kind binding upon territories like the Isle of Man and we would expect them to do that. However, the process might be slow or the Government might be forgetful, so the potential exists for a substantial time lag between legislation being enacted here and its becoming operational in the Isle of Man. That is not a theoretical problem. It is a very practical one, which was revealed in an extremely embarrassing episode that took place during a previous Parliament. Hon. Members may remember the appalling events that took place in Rwanda. The popular view of the Rwandan genocide was that it was a very low-tech operation, on an appalling scale, in which enormous numbers of people were butchered with machetes. It was not fully understood at the time that the authority of the Rwandan Government was upheld by more sophisticated weaponry. That was how they controlled the country.

Some of that sophisticated weaponry originated with arms brokers, some of whom were based in this country. In one case a company called Miltec, registered in the Isle of Man, was involved in the transshipment of weapons via what was then called the Democratic Republic of Congo. That was not subject to UN arms embargoes, so it was a conduit for armaments. There is little doubt that, entirely unintentionally, this country became indirectly complicit in the Rwandan Government's activities.

To be fair to the Government of the time, that fact was recognised as extremely embarrassing, and they instituted an inquiry into the matter. An exchange that summarises the outcome of those discussions took place on 21 January 1997, when the present Deputy Speaker, the right hon. Member for Saffron Walden (Sir A. Haselhurst), put a written question to the then Mr. Malcolm Rifkind about how the problem had arisen and what lessons could be learned from it. I shall not quote the whole answer, which is quite extended, but the key points made by Mr. Rifkind, which relate to my amendment, were that the UN arms embargo with respect to Rwanda was not implemented in the Crown dependency and that there was also a delay in its implementation in the dependent territories. The time lag was crucial in providing an opportunity for the brokers to operate.

Mr. Rifkind and the Government of the time established an interdepartmental Committee to analyse the problem, and it concluded that there had been a lack of consistency in implementing embargoes in the UK, its dependent territories and the Crown dependencies. That Committee, which reported at the end of 1996, recommended specifically:

``All future binding UN arms embargoes should be applied promptly in the UK and in Crown dependencies and the dependent territories, in accordance with HMG's international obligations.'' —[Official Report, 21 January 1997; Vol. 288, c. 537.]

My amendment is intended simply to give force and urgency to that recommendation, which was not controversial. Everyone accepted that it was an entirely sensible reaction to the Miltec scandal. We have suggested that a 40-day limit should be put on bringing forward the Order in Council that would make the legislation effective in the Isle of Man. The period could be 30 or 50 days; it is the spirit of the amendment that I want the Government to understand.

Rob Marris (Labour, Wolverhampton South West)

I have every sympathy with the spirit of the amendment. However, it has the potential to do the reverse of what the hon. Member for Twickenham (Dr. Cable) wants. If the 40-day deadline were missed, Her Majesty would not be able, by Order in Council, to extend the provisions.

Robert Key (Conservative, Salisbury)

I entirely understand the reason for the amendment. It is important to probe the Government's thinking on the matter. I recall well the episode that the hon. Member for Twickenham described. There were enough blushes throughout Government to ensure that lessons were learned. Of course the hon. Member for Wolverhampton, South-West (Rob Marris) is right on the technical point about the amendment's having the reverse effect to the one intended.

I hope that the Minister can convince us that lessons have indeed been learned, not only in Whitehall but in the Isle of Man which, after all, has an ancient Parliament. Its parliamentarians are astute and I have no doubt that they would not want the Isle of Man to get into the same predicament again. I hope for the Minister's reassurance, but I am glad that the hon. Member for Twickenham raised the issue.

Nigel Griffiths (Labour, Edinburgh South)

I, too, am glad that the issue has been raised, and I am grateful to the hon. Member for Twickenham for doing so. My hon. Friend the Member for Wolverhampton, South-West is right in his interpretation of the Bill, in that the effect of the amendment would be to risk preventing clause 15(5) being exercised after 40 days past Royal Assent.

That is the technical reason for our rejection of the amendment. Let me seek to persuade the hon. Member for Twickenham that he should withdraw it on principle. We have received firm and detailed assurances from the Isle of Man authorities that they will be giving full effect, through Manx legislation, to all the controls made in or under the Bill, including the new controls to be imposed on arms trafficking and brokering in terms of transfers and technical assistance. That is in accordance with the 1979 Customs and Excise agreement that governs the customs union between the United Kingdom and the Isle of Man and which obliges the Isle of Man to maintain export controls parallel to those operating in the UK.

The Miltec case was mentioned and I believe that, following that case, procedures were tightened for the imposition of embargoes in the Isle of Man. In respect of the other territories, we have no reason to believe that any of them will be unable to implement similar controls by means of their own legislation. The inclusion of a permissive extent provision at clause 15(5) is therefore essentially a precautionary measure. I hope that, in the light of that explanation, the hon. Gentleman feels able to withdraw the amendment.

Vincent Cable (Liberal Democrat, Twickenham)

I accept that the amendment could be counterproductive, and I would not want that. If the Government have been in contact with the Manx authorities and have had firm assurances from them that they will close this loophole, that seems perfectly adequate. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 15 ordered to stand part of the Bill.

New Clause 1 - End-use monitoring

Vincent Cable (Liberal Democrat, Twickenham)

I beg to move, That the clause be read a Second time.

The two new clauses deal with issues of some substance and importance, which are partly overlapping but remain distinct. One issue is that of the end use of arms and the other is that of overseas production, which I shall deal with later. We all understand the problem of end use—arms can be exported in an entirely proper and appropriate way and in good faith, but the purposes to which they are put are completely unexpected and very damaging. There should be a process to ensure that that is controlled. It is fair to say that the Government's approach shows that they understand the problem. There are mechanisms in place for dealing with end use—I am not suggesting that we are dealing with an entirely blank sheet of paper. There is a mechanism, but the question is whether that mechanism is adequate.

As I understand it, the procedures envisaged by the Government will involve checking with companies that apply for licences that they have received guarantees from importing countries that they will not improperly use equipment and that there is a pre-licensing checking process in place. I would ask whether that is sufficient. The purpose of the new clause is to suggest that a post-licence system for checking that the agreements and guarantees are being honoured and observed is required.

I should like to return to some examples of what has happened in the UK in the past to suggest that this is not an academic issue; there are real, practical problems. At our previous sitting, we discussed the problems that arose as a result of the export of Hawk aircraft to Indonesia. Assurances and guarantees were given by the Indonesian military that the weapons would not be used in East Timor, but it subsequently emerged, and was demonstrated, that they were. A similar problem arose in relation to the contracts with Zimbabwe. It was intended that the aircraft should be used for Zimbabwe's self-defence, but in fact they were used in the Congo.

There is another, more topical example, which shows the elusive nature of the problem of end use. British companies have been involved in the export to Israel, not of final products but of components for attack helicopters and air-to-surface missiles. There is no reason why British companies should not be involved in the supply of equipment to Israel for its self-defence. People have different views on the Arab-Israeli dispute, but that seems to be a reasonable starting point. However, entirely unknown to the Government who authorised the transactions, some of those weapons have been used as the weapons of first choice in the intifada. Buildings have been strafed by the attack helicopters, for example, which was not the original intention of the supply. I use those examples to show how armaments are used for entirely unpredictable purposes. It is not adequate to have assurances at the time that they are being properly used; checks need to be made after the event.

The Government might introduce a somewhat stricter regime. We are not arguing for blanket prohibitions, but for a somewhat stricter regime than is currently proposed. Precedents exist of other countries that operate such a system, which seems to be administratively efficient and effective.

I can cite examples of contrasting cases from two different types of country. Belgium is a marginal supplier of armaments but is involved in a lot of transshipment and brokerage. The Belgians have a system of end-use certificates that require a written guarantee by the importing agency that it will not re-export arms. Three months after the goods have been exported, the Belgian Government monitor the process and require proof of delivery and details of transit and travel plans. That is an ex-post checking system.

Some may regard the process employed in the United States as more credible than that of the Belgians. No one would accuse the United States of being sentimental on arms export matters, but they have every reason to be diligent in ensuring that arms are not misused and do not fall into the wrong hands. They have developed a system similar to that of the Belgians, which appears to be effective. Exporters must submit a non-transfer end-use certificate in the first instance. They are required to comply with United States law and to ensure that their exports are confined to purposes specified in defence agreements and treaties between the United States and recipient countries. They must provide full details about the articles or data being exported and the end use, which extends to states that receive retransferred United States weapons.

The American machinery for implementing this system is called the blue lantern programme. Controversies have arisen in the United States about how diligently and effectively that is implemented. However, it has introduced some 4,000 checks, roughly 10 per cent. of which show unfavourable results—in other words, the United States Government are not satisfied that end-use requirements have been met. Those contracts are then terminated. The United States has a system, then, which at the very least exercises deterrents to ensure that exporters act in compliance with the spirit of the law.

I ask the Government to give careful thought to whether our system could be brought up to the standards of best practice, which those of us who have followed developments in this field would regard as exemplified by the United States.

Robert Key (Conservative, Salisbury)

The issues raised by the hon. Gentleman occupy a great deal of time and concern among a wide range of people in our constituencies. I am sure that all hon. Members present have received correspondence on the matter from individual constituents and groups—pressure groups, non-governmental organisations and others.

I quote two examples of such representations, one of which was forwarded to me by my hon. Friend the Member for North Wiltshire (Mr. Gray) from the St. Mary's justice and peace group in Chippenham. Mr. Edmund Johnstone writes that there

``is no mention of overseas development in the Schedule. A clause is required which takes into account negative effects on overseas development. Such a clause did appear in the draft Bill published earlier this year.''

I should be very grateful for a brief explanation as to why that clause disappeared from the draft Bill and whether Mr Johnstone is correct. Like the St. Mary's justice and peace group, many people are encouraged by much of the Bill. However, they are concerned about the manufacture of products overseas, which is the subject of new clause 2, and about the general lack of controls.

I have read an interesting letter from Hilary Fenten on behalf of the Settle Northern Friends peace group, which the Quakers in Settle founded to support the work of the Northern Friends Peace Board. It refers to the need to control production under licence overseas, and to unilateral arms embargoes. In its helpful answer to a parliamentary question by the hon. Member for Elmet (Colin Burgon), which has been circulated to members of the Committee, the Department states:

``The Government will press for international embargoes to be imposed on countries in conflict''

as a result of the consultations that they have undertaken. That is important.

On the substance of new clause 1, we are surely all in favour of monitoring. That is exactly what Foreign and Commonwealth Office staff do at diplomatic missions overseas; they are aware of what is going on. Journalists, pressure groups, NGOs, tourists and remote sensing from space all help the Government to monitor end use up to a point. The intention is there.

Occasionally, mandatory monitoring is imposed by the United Nations. The inspection regimes for weapons and production facilities in Iraq are an ideal—perhaps I should put that word in quotation marks—answer to the problem posed by the hon. Member for Twickenham. We try hard to monitor end use; it is in everyone's interest that we should.

As to the United States' policy on extraterritoriality, there were fierce arguments in the House a few years ago about extraterritoriality and its unintentional impact on third parties. The United States' insistence on imposing extraterritoriality was not popular and impacted on our constituents and their jobs for the strangest reasons. There were incidents involving Cuba, with which the United States has always had a delicate relationship. There were bad consequences for British companies and their work forces, so I am not happy with the concept of extraterritoriality.

The hon. Gentleman came up with the old canard about Hawks in East Timor, but he does not have to take my word on the issue. Whenever the then Secretary of State for Defence, Lord Robertson was challenged from the Labour Back Benches, he reminded the House that Hawks were not operational in East Timor. Indeed, the manufacturers said that they did not have the range to get there from their base.

One of my major problems with new clause 1 is that it would be impractical without building in contractual obligations on the part of the exporting company to insist that the end user provided for inspection by a British company. I am not sure how that would work in practice; indeed, I do not think that it could be done. The new clause would also place another expenditure burden on the Government, and I would prefer that those resources were made available for other commitments, including international aid.

Although new clause 1 encapsulates the worries of many people, it is impractical, and we shall have to hear what the Minister says. If he cannot convince us, we shall have to consider what to do.

Vera Baird (Labour, Redcar)

I invite the Minister to consider the practicality of introducing a clear system for end-use certification and monitoring of exports in the Bill. Some of the huge concerns on the subject have been made clear and have reached the most far-flung regions of our debate.

I welcome the fact that the Government have made it clear that they are further considering the possibilities of arms being diverted to undesirable users when licensing applications are assessed, and that the Government have put in place additional procedures to avert that problem. However, the Government will not be convincingly sure whether end-user undertakings have been broken without post-export checks and if they continue to rely on guarantees of self-evidently variable quality. An explicit reference to end-use monitoring in the Bill would not only enormously strengthen its purpose, but send a clear signal that the problems associated with end use were taken seriously.

I suspect that the Government might say that end use is monitored through some informal and ad hoc mechanisms, including reports from NGOs and the media. Perhaps those mechanisms obviate the need for more than is currently available, but I suggest that an effective end-use control system must be based primarily on monitoring by the Government, with NGOs fulfilling a complementary role.

I do not want to get hopelessly bogged down on the subject of Hawk jets and Indonesia, but it is an important, germane and accurate example of a situation in which much information was readily available, not to the present Government, but to the previous Conservative Government. Either they were unaware, I say charitably, of the information about the use of Hawk jets in East Timor, or they rejected or ignored it. The information came from diverse sources.

I feel that I should briefly rehearse what was said in July 1996 when the information, which had been in the public domain for some time, began to take the form of evidence in court proceedings at a trial held on the topic in the north of England. Jose Ramos Horta, now a Nobel laureate and then the Foreign Secretary in exile of East Timor, testified that many documents were available from the Roman Catholic Church in East Timor, with which he was in frequent contact, stating that British-built Hawks supplied under British Aerospace's first contract with Indonesia had often been involved in air attacks against the East Timorese.

The journalist John Pilger gave evidence that he had clandestinely entered East Timor in 1993 and had not only seen Hawk jets on many instances, but grown to appreciate the local population's familiarity with the sound that they made as they attacked. Professor Paul Rogers from the department of peace studies at the university of Bradford testified on a point similar to that made a moment ago about range. He made it clear that the first batch of four aeroplanes sent by British Aerospace under its second contract with the Indonesian Government went to the Bandung squadron, which was well in range of and spearheaded the airborne attacks against what was described as counter insurgence in East Timor.

Robert Key (Conservative, Salisbury)

Why does the hon. Lady think that Lord Robertson misled the House of Commons when he was Secretary of State for Defence?

Vera Baird (Labour, Redcar)

That is not what I am suggesting at all. I am putting forward hugely valuable evidence, and I invite the Minister to think that it will help make the point that I shall come to in a moment. The evidence was given in court and merits that respect. Indeed, it was given a great deal of respect by the fact finders on that occasion. In that situation, if the evidence is true, end-use guarantees were being wholly disregarded. That information came through the Church, the NGOs and the experts whom I have quoted, and it was disregarded.

Joe Benton (Labour, Bootle)

Order. I am rather tardy in pointing this out, but there was a reference to Lord Robertson's having misled the House. I must ask the hon. Member for Salisbury to withdraw it. Lord Robertson has the same protection as hon. Members and it would be appropriate for the phrase to be withdrawn.

Robert Key (Conservative, Salisbury)

Of course, Mr. Benton, I shall follow your ruling and withdraw it. However, I was not alleging that Lord Robertson had misled the House; I was inquiring why the hon. Member for Redcar (Vera Baird) thinks that he told the House what he told the House, with which she disagrees. I do not think that Lord Robertson would ever have misled the House of Commons. That was my point.

Vera Baird (Labour, Redcar)

I applaud the hon. Gentleman's dexterity. It seemed plain to me that he was alleging the misleading; I certainly was not. May I conclude my real argument, which is important? The multiplicity of information that came concretely into evidential form on the occasion that I mentioned was from diverse sources, upon which the Government would, no doubt, now rely. In July 1999, the chief of the Indonesian defence staff admitted that Hawks had been used, although he declared that they had merely been used to fly over Dili in an intimidatory way. We had end-use guarantees and we had information that they were not being kept; nothing was done about it and in the end a confession was made that that information was correct and that the exercise of having end-use guarantees had been worthless for the large number of people killed in East Timor.

How different the situation would have been, had the then Government been obliged to collect the information themselves and to monitor all the allegations as they were made.

I pray in aid the practical example that was given earlier of the United States' very powerful, very careful scrutiny of end-use monitoring in suggesting that—despite the best endeavours of the Bill and despite the Government's efforts to tighten up licensing with an eye on end use—the extensively quoted example could occur again today if there is not a really substantial and practical system of end-use monitoring. I invite the Minister to reflect on that.

Nigel Griffiths (Labour, Edinburgh South)

I want to make it clear to the Committee how seriously the Government—and I, as the Minister responsible for export control—take, and must take, allegations about diversion and the end use of such products. In my work as a Minister, I weekly, if not daily, consider export licences in which the category about the risk of diversion is a very firm one. I want to be sure that no one in the Committee thinks that it is a casual add-on or an afterthought; it is an integral part of the decision-making process that I am required to take, and to advise the Secretary of State on, where any possible arms export licence is concerned. I am, as any Minister is, obliged to look at the evidence provided by any group about diversion in the past. That includes the excellent work done by our missions overseas, which report back to me, and reports from the Ministry of Defence or defence companies, which may be competitors, of weapons or goods that have previously been diverted. We have intelligence on the subject from non-governmental organisations and international organisations—and from Members of Parliament who also give us feedback. It is all taken very seriously.

I was not aware that Belgium was a shining example of the best arms-control procedures, but I have a briefing note produced in August by the Campaign Against Arms Trade, on the United States. I know that several other hon. Members received a copy of it. Under the heading ``US `diversion' examples'', it cites eight examples from a study of 18 co-production agreements, in which five cases of unauthorised transfers had been found. The briefing paper says of one case:

``Brazil transferred US technology to Iraq, where it was used to improve the targeting capability of Scud missiles.''

Of another case, it stated:

``Israel has repeatedly transferred US-licensed missile and radar technology to China in the 1980s and 1990s.''

Those are two of eight examples of flaws found in the US system, so although people strongly—and genuinely, like my hon. Friend the Member for Redcar—recommend the US system, I believe that they should also listen to the critics of what happens in the US. As I said on Tuesday, there is a danger that we may introduce a system that, even with the best of intentions, turns out not to do the job that we thought it would.

Let me share with the Committee the practicalities of how Ministers treat requests for export licences. As well as looking at the end use and previous history, we consider the risk of diversion. A thorough exercise is undertaken, using all available information, to assess the risk. Hon. Members will know that previous annual reports, issued when I was not the Minister, contain clear examples of the risk of diversion being the reason for refusal of export licences.

However, I am citing examples given to me of what has happened in America and others are raising examples perhaps of diversion from Britain. The fact that there are such examples shows a failure in the first place not to grant the licence. I am particularly concerned with the new clause because, in principle, it is shutting the stable door after the horse has bolted. For example, some countries talk tough but do not take effective action. Secondly, the new clause is intended to provide follow-up monitoring of all exports of technology, transfers, technical assistance and goods traded that are controlled under the powers in the Bill.

I am sure that no one, not even John Pilger or NGOs, has accused companies of diverting items in the past, nor have they been accused of causing a risk of diversion, but we would have to monitor them as well. If the United States has similar powers, that may be why we have heard of those eight examples of loopholes being exploited or of the US monitoring system being flouted.

I have stressed throughout the passage of the Bill that our commitment to achieve the most effective arms control regime is paramount. I believe that to make it effective we must focus our attention—as we are doing—on the criteria under which Ministers are allowed to operate, and under which officials help the police when dealing with the export of arms or associated technology, and other items in relation to which Ministers are given powers under the Bill.

I resist the new clause for two reasons. First, it could send people off on wild goose chases and divert our officers from monitoring properly what is happening. I am obliged to go through that process in any case; we have refused licences because we have had feedback about diversion. Secondly, the regime that we are establishing, policing and subjecting to parliamentary scrutiny will all greatly narrow the potential for abuse. We all want to eliminate that abuse, but we are dealing with a world in which unscrupulous and illegal arms traders and brokers will seek to evade any rules or laws, as we have seen in the United States and elsewhere. We should resist the new clause, given that powers relating to the risk of end user diversion are embodied in the Bill and that Ministers are already following such practices.

Rob Marris (Labour, Wolverhampton South West)

Could I ask the Minister for an assurance that the monitoring that we are discussing will be covered in the annual report referred to in clause 9? He may already have given such an assurance—I apologise if I missed it.

Nigel Griffiths (Labour, Edinburgh South)

The annual report will provide details of end users of equipment. We responded to the Quadripartite report, which made a recommendation about end user monitoring. Our response states:

``The Government will continue to provide details of end users for equipment covered by specific licences in confidence to the Committees''

at their request. To be helpful to my hon. Friend and the Committee, I will confirm that and return to the matter.

Vincent Cable (Liberal Democrat, Twickenham)

May I briefly reply to some of the points that have been made? I start with the remarks of the hon. Member for Salisbury, whose general point, which had some force, was that extra-territorial application of laws caused problems for international commerce. He is right in saying that in international trade, the Helms-Burton Act and the D'Amato amendments in Congress have created problems for everyone. He will remember, as a member of the previous Conservative Government, that one of Mrs. Thatcher's finest hours came when she stood up to President Reagan on the extra-territorial application of embargoes that aimed to prevent the construction of a pipeline to Russia. As a result of her stand, we have cheap, clean gas in western Europe, which otherwise we would not have had. Extra-territoriality is not an unmitigated good, for the reasons that the hon. Gentleman gave.

The problem with the logic of the hon. Gentleman's argument, however, is that if we live in a world in which the United States applies its regulations extra-territorially while we forsake that option, United States regulations will be applied everywhere. By trying to ensure proper end-use control, we aim to express our concerns in our legislation. There may be some incompatibility between our legislation and that of the United States that would have to be resolved, but I do not think that the hon. Gentleman's objection is a fundamental one.

The hon. Member for Redcar has dealt very well with the points on Indonesia, and I do not want to pursue that canard, as it has been described, unnecessarily. I know nothing about Hawk aircraft or their technical specifications, but the chief of staff of the Indonesian army publicly acknowledged that they had been used in the East Timor conflict. How they got there, I have no idea.

I found the other point made by the hon. Member for Salisbury a little odd. Perhaps when he has been a spokesman on trade and industry for a bit longer, he will rethink his position. He seemed to be saying that it was all right to have a system of monitoring that involves an extensive process of self-regulation by the private sector but that we must not inflict any burdens on the poor old Government. That is the exact opposite of the line that the Conservatives normally take on regulatory matters, which is that we must spare the private sector regulatory obstacles and that the Government must carry the cost. We are not talking about a major piece of regulation, but a small corner of the problem.

I have two reactions to the Minister's intervention. First, I would like to discuss the logic of his arguments about the United States. There are failures in its system, but I am unsure about what conclusions he was drawing from that. If a system is porous and has gaps in it, should it be abandoned? That is rather like the argument that because plenty of drugs get through the American control system, there should be an open market in narcotics—of course there should not be. There should be more monitoring to ensure that those anomalies do not occur. I am not sure of the logic of the Minister's argument.

The other point was more substantial and I sympathise with the Minister on it. The tone of his reply was helpful and I do not think that we are very far apart. We need prevention rather than cure, and there should be a proper system of risk assessment. Applications should be examined before the event to ensure that diversions do not occur. That is absolutely right and I have no quarrel with it. If the British can develop a system that is effective in picking out problems before they happen, we will have made a considerable advance.

My inclination is not to press the amendment, but before I move on I would like to ask the Minister why he feels that it would be unhelpful to have additional powers to check retrospectively? We do not want a vast apparatus for checking that the regulations have been enforced: we just want to have the powers to check. Why might that present problems? Why would it be onerous to have such powers? If he would be kind enough to respond to those points, I will then withdraw the amendment.

Nigel Griffiths (Labour, Edinburgh South)

I hope that I can be helpful to the hon. Member for Twickenham and to my hon. Friend the Member for Redcar. We explained in our annual reports that checks have been conducted on the use, on location, of equipment after it has been exported. That is in the annual reports and the Bill will put those reports on a statutory footing. I have tried to persuade the hon. Member for Twickenham that the Government have already shown that they are able to monitor the end use of defence exports in circumstances where such monitoring makes a contribution to our efforts to prevent diversion or misuse. We do not need the extra powers: we can do it when we believe that it is appropriate, such as when there is any risk of diversion, or when there have been reports of diversion in the past.

The hon. Member for Twickenham asks me to justify the criticisms of the US regime that I quoted. There are further quotations from that briefing in respect of licensed production. It states:

``The US has one of the strongest export control regimes in the world, with legislation making the `diversion of technologies to unauthorised uses and prohibited third parties' illegal.''

I gave examples from the document earlier. It states:

``Unfortunately, `inadequate enforcement' means that there are frequent abuses.''

There was inadequate enforcement of prohibition in America. One could argue that there was no way to enforce it adequately. The fact that the Americans, with all their resources, have not been able adequately to enforce a law might suggest that it is impractical. However, we have the powers and it is important to use them, where appropriate. By requiring monitoring of all exports or transfers of technology, technical assistance or goods—anything that is controlled under the Bill—the new clause would create the risk of frequent abuses and inadequate enforcement cited by CAAT with respect to the United States.

However, I want to reassure the Committee that the end-use risk of diversion is at the forefront of our minds as one of the main elements for consideration under the Bill for any Minister when deciding whether to approve a licence.

Vincent Cable (Liberal Democrat, Twickenham)

I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 2 - Licensed production overseas

Vincent Cable (Liberal Democrat, Twickenham)

I beg to move, That the clause be read a Second time.

I think that this is to be the last item of business on the Bill in Committee, and I hope that hon. Members will, unless the Minister's reply is exceptionally convoluted, be able to attend Question Time.

The issue of overseas production is a bigger and more complex problem than that of end use. It requires serious consideration, because many of the problems associated with arms exports are wrapped up in that concept. It is a bigger problem because if production overseas is licensed by an exporting company, the ramifications go far beyond the question of simply diverting supplies. If production occurs overseas, the potency of weapons can be considerably advanced in the production process and in unexpected ways. There is also the possibility of multiplication, with mass production units provided by the supply of British machine tools or underlying technology. Potential proliferation, as well as diversion, is at issue.

Another reason for treating this matter as one of great importance—we heard an eloquent statement about that from the hon. Member for Salisbury yesterday—is the nature of the modern armaments industry, which no longer involves national companies exporting finished products overseas. It is a more complex business, involving subcontracting and alliance arrangements between companies. Increasingly sophisticated developing countries expect, as a matter of course, that provision for local production will be written into the contract. Certainly countries such as China and India take that attitude, but even countries a bit lower down the technological pecking order would normally insist, as part of any agreement, on the capacity to produce locally. If we are to prevent an abuse of that system, adequate provision to cover overseas production will be needed.

Overseas production can present two possible abuses of the regulations. First, if a transformation took place in production—such as enhancing the power of a weapon—we could supply weapons to another country that we would not have supplied had we known what the final product would be. The other is that production units overseas can be used to divert supplies to other countries that we would not want to supply.

To make my discussion a little less abstract, I shall give a couple of examples in which the NGOs that have been monitoring the problem think that serious difficulties have arisen. I am sure that the Minister is familiar with both; they both relate to Turkey, which may be regarded as one of the less problematic countries with which we have to deal as a member of NATO. None the less, Turkey has been at the centre of several controversies in connection with overseas production, one of which was the large-scale production of Land Rovers by a Turkish company called Otokar. Land Rovers are off-the-road vehicles, and are not controversial in themselves, but with a little enhancement they can become potent pieces of cavalry. With the addition of machine guns, night radar and other equipment, they have become effective weapons and have been used in theatres of conflict by countries such as Pakistan. The factions that operate in Afghanistan have used fast-moving Land Rovers as their key weapon. The supply of enhanced Land Rovers from Turkey has resulted in the widespread dissemination of effective weapons to countries that we would not otherwise have wanted to supply—Algeria, for example, and possibly Pakistan, until the recent conflict.

Another issue relating to Turkey is that of a company called Heckler and Koch, which is a subsidiary of Royal Ordnance, which is now a subsidiary of BAE. The Heckler and Koch factory in Turkey was engaged in the mass production of assault rifles and submachine guns. It is widely acknowledged that substantial volumes of armaments from those production installations have gone elsewhere, including Indonesia. We have been through the Indonesia story, but I believe that that is reasonably well documented and not especially controversial.

The Government seem to accept that there is a problem—it is implicit in many of their statements. We must ask ourselves how it should be dealt with and whether the Bill before us is adequate. The Government consulted industry, but we need to establish whether the mechanisms that they propose are sufficient, given that they rely heavily on industry's self-regulation. The policy essentially rests on companies involved in overseas production obtaining guarantees from their counterparts in the other countries. The Government accept the need for direct controls when there are UN embargoes, but there are countries to which we may not want to supply arms that are not subject to such embargoes. As the Government believe that it is necessary to rely on direct controls with direct arms exports, why do they feel that a looser, more self-regulating system is appropriate for overseas production, which is equally serious, and potentially more so?

The new clause would introduce a system similar to that in the United States, which has a more comprehensive system for monitoring and control, as we heard during the discussion on end use. We would like the United Kingdom system to involve the licensing of production for overseas contracts, and to build into its surveillance a condition that would prevent such contracts from being permitted when an application for a direct weapons transfer would have been refused. That would be one condition. Contracts would also not be allowed if the recipient state could not demonstrate sufficient accountability, or if a country were subject to a UN embargo and had a record of breaking embargoes. Those conditions are not covered at present. Our provisions would also take account of any concern that a recipient Government might license the export of equipment to a country to which the United Kingdom would not give a licence. In other words, we propose a framework in which additional conditions would be built into the licensing process from the outset.

My colleagues and I are not simply improvising a tougher regime. It is important that Committee members understand that the spirit of the amendment reflects that of early reviews in the House.

It is important that Committee members understand that the spirit of the amendment reflects that of early reviews in the House. The Quadripartite Committee felt strongly about the need for firm controls over overseas production—rather firmer controls than those currently built into the legislation. I should like to quote two key passages of the Quadripartite report, which cover the point admirably. It argued that:

``What is required is a system which ensures that the Government knows when a licensed production facility is being set up, and which ensures that the goods produced are not exported to countries or end-users where the UK would not licence them.''

That is precisely what the amendment is designed to achieve. The Committee also believed that

``some statutory powers may be necessary to control licensed production overseas, and recommend that the Bill provide for such powers to be taken in the future under secondary legislation . . .''

That is what we are proposing, and we need a full explanation of the fact that, although the Government recognise that there is a problem, they appear to have settled for a weaker regime than that which has been recommended.

Vera Baird (Labour, Redcar)

The hon. Member for Twickenham has provoked discussion of this issue. My interest comes about because Redcar, which I represent, contains the port at which the Iraqi supergun was stopped. Many of my constituents are actively engaged in campaigns because of their great concern about the arms trade. Licensed production is the issue that has prompted the most substantial contribution to my postbag since I was elected. I shall, therefore, listen to the Minister's explanation with a genuine desire to report back to the many anxious and interested people in my constituency.

Robert Key (Conservative, Salisbury)

The Quadripartite report to which the hon. Member for Twickenham referred was not quite as decisive as he suggests. In its recommendation at paragraph 106, after the comma at which he stopped, it said:

``to be used only if a non-statutory regime is shown to have failed.''

It also quoted Lord Scott, who observed:

``I do not believe we will be seeing in this country any claims for damages for breach of undertaking in this sort of area.''

That referred to contractual terms to control re-export that would be readily capable of enforcement. However, the Quadripartite Committee suggested that we need a system in which

``the Government knows when a licensed production facility is being set up, and which ensures that the goods produced are not exported to countries or end-users where the UK would not licence them.''

The Committee acknowledged that it was a difficult area, not only in knowing what was going on and whether anything could be done, but in knowing whether a non-statutory regime was working. Given that the Secretary of State for Trade and Industry can revoke licences if the end user is not as specified, or if new evidence comes to light that the Government has been misled in some way, it would be a foolish company that established production facilities in another country knowing that that might cost it its home base--that possibility would always hang over it. The practicality is important—I am not sure how the Government could possibly enforce that overseas.

I take on board what the hon. Member for Twickenham said and, having read the Quadripartite report, I am sympathetic. I understand why the Committee could not be conclusive. I am inclined to support the Government, because we have not had many cases where the system has broken down, but I shall be interested to hear what the Minister says.

Nigel Griffiths (Labour, Edinburgh South)

In short, the Government consider the amendment unnecessary because the Bill already gives us effective powers. It provides for significant control over the practical means by which licensed production arrangements are established and maintained. Such arrangements typically depend on the company in the UK that licenses the manufacture of its products supplying component parts or production technologies to the overseas producer. Where the product is manufactured under licence and has a potential military end use, an export licence will, in most cases, be required before the equipment and technology necessary for the establishment and further operation of the licensed production facility can be supplied.

The Bill provides a new power to control technology transfers, whatever the means involved. That will close a loophole in the export control regime, whereby a licence would not be required to transfer military technology if the transfer took place by fax or e-mail.

Where, in the case of potential military end use, essential components are needed to ensure that licensed production overseas can be maintained, a licence will be required for updating, for building the facility and for supplying the components. We have made it clear in discussions on licensed production overseas that a licence will not be granted for the supply of controlled goods or technologies that are needed for an overseas manufacturing facility where there is a clear risk that the finished products could be used for internal repression or external aggression or where there is an unacceptable risk of diversion to an end user.

The Bill will strengthen and make more comprehensive the UK's capacity to control the supply lines on which licensed production arrangements depend. The important issue is that we are introducing measures to effectively and practically control licensed production overseas. We are likely to be able to hamstring it effectively by refusing licences if there have been substantiated reports of previous diversion or illegal use. I therefore urge the Committee to reject the new clause.

Vincent Cable (Liberal Democrat, Twickenham)

Much of the argument rests on whether the American system, which applies to about half of all arms exports and overseas production, is better than our own. Perhaps the Minister can explain something. The Government have examined the American model for overseas production and, for whatever reason, have found it lacking. Many of us are trying to respond to constituents' letters on the issue, and there have been exchanges with the Campaign Against Arms Trade. The Minister has helpfully written to me about how he wants to deal with them. He says that the CAAT briefing document contains a number of misleading statements. I am not sure what is misleading and what is wrong. Rather than continuing with an opaque exchange of letters, perhaps the Minister can explain what he thinks is misleading and what is wrong with the argument that has been advanced.

My second question tracks our discussion about end use. Would it be worth the Government's putting a bit of extra effort into ensuring that their regulations were enforced? I am suggesting not that there should be an overbearing bureaucracy, but that the Government should have the powers to check matters. Overseas production is difficult to monitor. I am not arguing that companies that might be innocently involved in the misuse of overseas production should be dragged through the courts in an expensive and elaborate process. All that is required is that the Government have the power to terminate a contract where abuse occurs. The Minister seems satisfied that he can pick up anything inadvertently as a result of knowing something about a company's past records. We are suggesting a mechanism whereby, if something goes wrong—possibly quite innocently—the Government have the power to step in and to stop the licence proceeding any further, after having checked that there is a diversion of use within an overseas production facility. It is difficult to understand why the Government should not want those powers. What is it that the Minister regards as deficient in the American system and on which issue does he want to correct the campaigners?

Nigel Griffiths (Labour, Edinburgh South)

A number of points have been raised, and I am just referring to the evidence that Lord Scott gave to the Quadripartite Committee, and some of the key questions that he raised on this issue. He asked what the remedy would be for a breach in the case of an overseas company that had broken its undertakings. That company could not be prosecuted effectively in this country, particularly if the Government of another country had been responsible for the breach. We carefully considered Lord Scott's evidence and reached a firm conclusion.

We completely reject the assertions made by the Campaign Against Arms Trade about the gaping hole in the UK export control regime with regard to licensed production. NGOs have given me examples that are not current but go back a long way. Many of us would not disagree with those examples. That is why we believe that the framework will tackle abuses that have been raised with us and that have been substantiated. Other abuses have not been substantiated, which is another matter.

We are attempting to build into the Bill an effective way of controlling licensed production. As the Campaign Against Arms Trade acknowledges, the licensed production arrangements typically depend on the supply of component parts and design of production technology to overseas productions by the UK company that is responsible for manufacturing its products. We therefore have a direct influence on that, because it is highly likely that any transfer of parts or technology comes under the Bill and requires a licence. If evidence of the type produced by the hon. Member for Twickenham were substantiated, the Bill's provisions would allow the Minister to take action and reject that licence, because of the potential military end and diversion of use under discussion.

The Bill has adequate powers, and we should not be required to go further. That is the best way to curb the abuses. I use the word ``curb'' advisedly, because there will always be a battle to eliminate abuses, as other countries with lauded regimes claim. It is therefore important that we have the most practical, effective and tough rules to clamp down on the abuses as far as we can.

Gerald Howarth (Conservative, Aldershot)

The hon. Gentleman is most courteous for giving way, given that I have not been at the proceedings until now, for which I apologise. My hon. Friend the Member for Salisbury knows why I could not be here.

The Minister referred to curbing the abuses. He is giving the public the message that the measure tackles the abuse of defence exporting by British companies and individuals. Before the summer recess, I challenged him to give us some examples of where such abuse was taking place. It is not sufficient to give the impression that abuses are taking place without specifying where that is happening.

Nigel Griffiths (Labour, Edinburgh South)

I am glad that the hon. Member for Aldershot has come in and made that point. There are abuses. For example, if we receive evidence of diversion, which is an abuse, I and—thanks to the Bill—future Ministers, will be able to exercise powers. The question of who is responsible for that diversion is another matter. It is our job to stop the abuse and illegal diversion of goods so that licensed production overseas is in order. It is those abuses that we act to stamp out, and we make no apology for that. The purpose of the Bill is to ensure that there is a regulated and legal trade in arms and arms technology as approved by the United Nations and to enforce effectively embargoes from the UN, the EU or the UK. There is a lot of merit in what the hon. Member for Aldershot says and he has grasped the key point of the Bill.

Vincent Cable (Liberal Democrat, Twickenham)

I thank the Minister for replying to the hon. Member for Aldershot, who, had he been here previously, would have realised that we had had quite a few examples, some of which were controversial. To be positive about the Minister's response, and to make clear our position in the debate, I would say that the area of disagreement is quite narrow. The Government wish to act to prevent inappropriate overseas production and they appear to be satisfied that they can achieve those objectives if they can prevent licenses from being issued.

We are concerned with an additional point. If overseas production takes place inappropriately, possibly for entirely innocent reasons concerned with the behaviour of overseas parties, the Government should have powers to terminate the licence. It is not clear whether the present legislation provides for that. I would hope that in the course of the progress of the Bill to the Floor of the House that particular problem might be dealt with. On that basis, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Question proposed, That the Chairman do report the Bill, as amended, to the House.

Nigel Griffiths (Labour, Edinburgh South)

Mr. Benton, on behalf of the Committee, may I thank you for your diligent, firm and fair chairmanship of the Committee? I visited Hudson's Whistle Company recently in my other capacity as a Minister for small businesses. That company supplies the bulk of professional referee whistles in the UK and abroad. I did not have to hand you one of their whistles at any stage, but I hope that Hudson's appreciate the publicity that we are giving them for the excellent work they are doing in the midlands for British exports.

I would also like to thank the Clerks, Hansard, the police, my excellent Bill team and especially, my colleagues for their contributions to this short, important Bill. Expeditiously and informatively, we have touched on and considered in detail all aspects of the Bill and those on which there are differing opinions within the Committee and Parliament. I am grateful to Committee members for their co-operation and I look forward to further deliberations on the Bill before it receives parliamentary and Royal Assent.

Robert Key (Conservative, Salisbury)

Mr. Benton, may I echo the words of the Minister and thank you and the Committee for your kind indulgence in allowing me such an easy passage, after I parachuted in unexpectedly to carry on what was nobly started by my hon. Friend the Member for South-West Hertfordshire (Mr. Page), and also my hon. Friend the Member for North Wiltshire, who has been translated elsewhere. May I also add the attendants to my long list of well deserved compliments? They gave us the runaround, in the best sense of the word, in helping us to carry out our duties.

I look forward to continuing our discussions on the Floor of the House when we may hear from hon. Members who did not have the privilege to be members of the Committee. The issue contained in the Bill is important. We said from the start that the Opposition would not oppose the Bill in principle. The Committee has scrutinised it well. I am sorry that we have not won on all our points, but we have had a useful and constructive Committee.

Vincent Cable (Liberal Democrat, Twickenham)

May I add a few further words in the same spirit, Mr. Benton? I thank you and the staff for the businesslike and efficient conduct of business. We have had a minimum of time-wasting interventions. The business has been dealt with quickly, but all points have been thoroughly aired. We have had few Divisions and I suspect that the attendants may be worrying about their future employment if that practice continues, but I am sure that we can remedy that when we discuss other legislation. I thank all concerned for their conduct.

Joe Benton (Labour, Bootle)

I thank the Minister and the hon. Members for Salisbury and for Twickenham for their kind remarks. I, too, thank Committee members for their courtesy. It has been a very interesting Committee, and I wish all concerned every future success in deliberations on the Bill. I thank the learned Clerks, Hansard and the attendants.

Question put and agreed to.

Bill, as amended, to be reported.

Committee rose at twenty-one minutes past Eleven o'clock.