Corporate report

First joint report of the Committees on Arms Export Controls Session 2022 to 2023: developments in UK strategic export controls: response of the Secretaries of State for DIT, MOD and FCDO (HTML version)

Published 9 January 2023

This was published under the 2022 to 2024 Sunak Conservative government

Presented to Parliament

by the Secretaries of State for International Trade, Defence, Foreign, Commonwealth and Development Affairs

by Command of His Majesty January 2023

On 28 October 2022, the Committee on Arms Export Controls (CAEC) published the joint report of their inquiry ‘Developments in UK Strategic Export Controls’

This document is a joint response from the Secretaries of State for International Trade, Defence and for the Foreign, Commonwealth and Development Affairs, including contributions from His Majesty’s Revenue and Customs.

The paragraph numbers below correspond to the numbered conclusions and recommendations starting at page 43 of the CAEC’s report: Developments in UK Strategic Export Controls.

Government co-operation

(1) We are disappointed at the continued reluctance of the government to offer the Foreign and International Trade Secretaries of State to provide us with oral evidence. This risks giving the impression that the government do not attach the appropriate importance to parliamentary scrutiny of strategic export controls. While we appreciate that other ministers from the relevant departments have agreed to give evidence, we expect the government to be more accommodating in offering suitable dates for ministerial sessions. The offer of a one-hour session is unacceptable, given the breadth and importance of the issues covered by the committees.

The government recognises the important role of the CAEC in providing Parliamentary scrutiny of export controls and the work of the Export Control Joint Unit (ECJU). The Committees’ recent visit to ECJU’s offices in November, where they met Minister Huddleston and spoke with a range of officials on a variety of topics of interest, shows the government’s commitment to engaging with the committees and the minister’s commitment to providing evidence in a timely and effective manner. We recognise that unfortunately a number of CAEC sessions did not go ahead as planned last year owing to a range of factors.

(2) We acknowledge that the annual report contains a substantial amount of information that is helpful for our inquiries and that strategic export controls cover a wide range of areas so it is not always clear which specific topics will arise as our inquiry proceeds. However, it is regrettable that the government have in recent years only seen fit to submit a one-page letter welcoming our inquiries and giving a very brief general overview of its performance and policy developments during the year. We would, at the very least, expect the government to submit written evidence addressing the inquiry’s terms of reference. This would potentially save a lot of subsequent enquiries to the government as our inquiry proceeds. We also expect the government to be more proactive in notifying us of proposed policy developments.

The government notes the committees’ conclusions. As the committees recognise, the strategic export controls annual report is a substantive and thorough public record of the government’s activities in relation to export control. In providing written evidence to assist and inform the CAEC’s inquiry the government aimed to provide information that was additional to, but not duplicative of, information provided in our annual report.

As the committees are aware, ECJU has provided written information throughout the period of enquiries. This includes in March 2021 data on compliance and enforcement to allow for comparison with the data in the 2019 annual report evidence about the transformation programme information on transparency, public databases, delays on LITE, Transformation Programme, staffing levels, the updated Criteria and post shipment verification in May 2022 and in June 2022 information as requested by the CAEC planned oral evidence.

Strategic export controls annual reports

(3) Whilst we welcome the information contained in the strategic export controls annual report, stakeholders argue it is too descriptive of events and does not drill down sufficiently to provide qualitative or quantitative analysis of the data. We share stakeholders’ concerns about the transparency of information available on open licences, especially as the government has previously promised to review what further data it can make publicly available. Industry is already required to record this information, so we are unclear as to why the government has yet to improve the quality of information available.

The government is grateful for the committees’ perspective on the data available in the strategic export controls annual report and would welcome more specific information on stakeholders’ views on how to improve the ways in which this data is presented so that we may consider that in the design of future publications.

The government is conscious of the need to balance transparency of information with the administrative burden this transparency places on exporters. Users of open licences are required to make reports on their usage of those licences on an annual basis. This data is reported to ECJU and checked in compliance audits. Data on open licences is available to search on our reports and statistics searchable database. Registration is required to access the database, but it is free of charge.

(4) We recommend that the government improve the data that is available on open licences. The government should publish data in the quarterly “pivot reports” on the precise equipment and quantities exported, the companies exporting the equipment and its intended destination, and each strategic export controls annual report should include an analysis of this data. The ability to provide this data should be an integral part of the new LITE IT system.

Information about what is licensed in Open Individual Export Licences (OIELs) is published as official statistics each quarter. However, ECJU’s systems do not enable the collection of information on the precise equipment and quantities exported using OIELs which means we are currently unable to publish this information within the quarterly official statistics.

ECJU is developing a new digital licensing system known as LITE. LITE will have an interface with His Majesty’s Revenue and Custom’s (HMRC’s) new Customs Declaration System to enable greater and more reliable information exchange. The delivery of LITE is phased to allow for testing and modification, with OIELs being included in LITE at a later phase. When adding the OIELs functionality to LITE, the government will consider what data it would be most valuable to gather for transparency purposes.

We share our predecessor committees’ concerns over the continued delays in delivering the new LITE IT system. The rollout of the new LITE IT system must be progressed urgently. In response to our report the government should set out a specific timeline for each stage of the transition and the intended date for LITE to be fully operational. The government should provide us with 6 monthly updates on progress.

The delivery of the LITE service is being progressed urgently and is a priority for the Department for International Trade (DIT). LITE is a live functioning service which is issuing licenses to a select number of exporters who have been invited to use and test the service. It will be delivered through a phased set of cohorts to allow for improvements to be made before it is released to the entire exporter community.

The government will commit to ECJU providing the Committees with 6-monthly updates on progress. In addition, if it is of interest to the Committees’ members, ECJU can make arrangements to provide a live demonstration of LITE to get a better understanding of its current and planned functionality.

(6) A new IT system should not reduce the amount of publicly available information. We seek assurances that the LITE system will enable greater transparency on Open Licences and include a public searchable database as exists under the current SPIRE system. To increase transparency on exports, the government should enhance the search facilities of its public facing database.

A core design objective of LITE is to support the government’s transparency objectives and to better enable the licensing process to be appropriately scrutinised by ECJU’s stakeholders.

(7) We appreciate the hard and diligent work of ECJU staff during the COVID-19 pandemic. We recognise that this has been a busy time for the ECJU, with COVID related delays causing additional difficulties.

The government appreciates the Committees’ recognition of some of the challenges ECJU has faced in delivering its service particularly in relation to the coronavirus (COVID-19) pandemic. The professionalism and commitment of ECJU staff was critical to continuing this service during what was a prolonged challenging period. Due to the resilient IT systems DIT had in place prior to the lockdowns and the dedication of our people, ECJU was able to continue processing applications minimising the direct impact upon controlled exports.

ECJU put in place measures to support exporters recognising the challenges they had, for example by extending the time allowed for them to respond to requests for information. COVID-19 secure working practices were also implemented including rotas so that ECJU could continue to access highly classified material which cannot be done remotely.

(8) We welcome the decision to launch the ECJU Transformation Programme and the opportunity it provides to improve and reform the work of the ECJU and its relationships with stakeholders. However, given the duty of DIT to inform us of relevant developments, it is disappointing that the department did not do so on this occasion. Instead, we learned of its existence from the MoD’s Defence and Security Industrial Strategy. We expect the government to be more proactive in informing us of future policy developments.

(9) It is also disappointing that the government has not published terms of reference outlining the aims and remit of the ECJU Transformation Programme. The government should publish the terms of reference for the ECJU Transformation Programme, and provide us with 6-monthly updates on the Programme, including progress on its intended outcomes.

(10) We welcome the consultation that has taken place with the unions. This must continue and the government must ensure that they draw on the expertise of ECJU staff at all levels. We also welcome the customer survey of exporters. However, this engagement should go further. We recommend that the government hold a public consultation with stakeholders as part of the Programme. It is important that their views inform the Programme. The ECJU should look to continue engagement with industry beyond the Programme by establishing a formal mechanism for industry to interact with the ECJU to improve information sharing and to discuss concerns in the licensing process.

The Transformation Programme is an internal business improvement programme. The aims of the programme, which were communicated to the Committee in a letter in May 2022, are to enable ECJU to offer a professional customer-focussed licence application service, which provides timely and accurate advice and support. The service will be underpinned by modern technology and efficient processes. To operate this service effectively, ECJU’s culture will be open, inclusive, and professional, and staff will be supported and provided with access to learning and development opportunities.

The first stage of the transformation was completed by a dedicated team. From January 2023, the transformation will move into a continuous improvement model managed within ECJU. ECJU commits to providing the Committee with regular updates on the transformation and its continuous improvement activities, and ECJU will use its regular engagement with union representatives to keep them up to date on the progress of this work.

ECJU recognises the importance of engaging proactively with its stakeholders. That is why it has created a new dedicated post and team to lead ECJU Engagement. Building upon the existing engagement mechanisms with industry and academia, for example through trade associations such as ADS Group, this role will deliver a new stakeholder engagement strategy in 2023. A key objective of ECJU’s engagement strategy will be to establish mechanisms to consistently and effectively engage with industry and we intend to take exporters’ views into account in designing how these mechanisms should work.

(11) We are concerned by evidence regarding insufficient resources within the ECJU, particularly technical and specialist roles and Compliance Officers. The ECJU Transformation Programme should include a review of ECJU resources.

Future editions of the annual report should include data on ECJU resources including staff levels by grade, post and parent department.

The Committees are right that it can be challenging to recruit certain types of specialist or technical expertise. However, in general ECJU has made positive progress in filling its vacancies across a range of teams and in providing internal career development opportunities for its staff enabling the organisation to retain experience and talent.

ECJU’s new structure creates a more resilient and agile workforce which can respond quickly to changing demands or circumstances and the peaks of licence activity this can generate. ECJU has recently successfully recruited staff from industry and the military and, within DIT, ECJU is expanding its presence in the government’s Darlington Economic Campus enabling access to a wider pool of talent across the country.

(12) It is important that an independent assessment takes place of whether the Transformation Programme achieves its intended outcomes. Therefore, we recommend that 2 years after completion of the Programme the NAO undertake a review of the structure, performance and value for money of the ECJU to ensure it is fit-for-purpose.

In designing the Transformation Programme, ECJU has taken advantage of the findings of a number of independent and external reviews. Throughout the Transformation Programme its processes and outcomes have been scrutinised and challenged by the Government Internal Audit Agency (GIAA). ECJU will continue to benefit from this support and challenge as the GIAA will continue to work with ECJU on the development of LITE and will also continue to provide embedded assurance on our project to deliver the benefits of the Transformation Programme and other continuous improvement projects.

New Strategic Export Licensing Criteria

(13) We are concerned about the lack of consultation on the new Strategic Export Licensing Criteria. While we note that previous changes to the Criteria have not been subject to formal consultation, we believe that the unique circumstances of the UK’s withdrawal from the EU mean that a formal consultation would have been beneficial.

(14) We thank the Secretary of State for International Trade for writing to us setting out the background to the new Criteria. However, we would have appreciated prior notification and consultation on the changes. Prior scrutiny of, and consultation on, these changes with Parliament and stakeholders more widely, would have helped secure greater confidence in the new Criteria and address concerns regarding their impact prior to implementation.

The government notes the Committees’ conclusions. Discussions about potential changes to the Strategic Export Licensing Criteria, beyond those that were necessary as a result of the UK leaving the European Union (EU), only began in late 2021. As a result of these discussions, it was decided to amend the Criteria to more closely align them to the UK’s international legal obligations, including the Arms Trade Treaty, and to better reflect the government’s strategic export objectives.

(15) In response to our report, the government should set out which countries’ systems, from inside and outside the EU, that it considered when drafting the new Criteria. The government should also explain the processes it has put in place to ensure continued cooperation with the EU on strategic export controls. We also recommend that an independent review be commissioned by the government in 2 years to assess the effectiveness of the new Criteria. This should include a wide-ranging consultation process. We will also continue to monitor the impact of the new Criteria.

In developing its approach to the Criteria, the government benchmarked its export control policy and operations against those of the United States, Germany, France and Sweden. We found no evidence that these countries’ licensing regimes were substantially more effective or efficient than our own. Nevertheless, we determined that we should amend the Criteria to more closely align with our international legal obligations and to better reflect the government’s strategic export objectives. The government is satisfied that the Criteria provide a thorough risk assessment framework for assessing export licence applications and does not consider an independent review to be necessary or proportionate. We will ensure that the Criteria continue to properly reflect the government’s strategic objectives and international obligations.

(16) We acknowledge that the EU arms control rules (other than the dual-use items) in Common Position 2008/944/CFSP are part of the CFSP, rather than trade policy, and could therefore have been included in an EU/UK foreign policy agreement but that the UK government rejected such an agreement. However, we are aware of the concerns regarding divergence between the EU and UK’s controls systems and in particular the UK’s loss of access to the EU’s information sharing systems, especially in respect of the denial of licences. The government should explore options for an agreement that would grant it access to the EU’s information sharing protocols or explain in its response to our report why it does not deem this to be necessary.

To date there has been limited divergence between UK and EU export controls. The strategic export licensing Criteria remain compatible with the EU Common Position, and the UK and EU military and dual-use export control lists remain broadly aligned. The UK is an active participant in the international export control regimes, from which the control lists derive, and which provide opportunities to share information and discuss a wide range of export control issues with international partners, including EU member states.

While there would be benefits from having access to EU information sharing systems, any future cooperation and information sharing arrangements would be subject to negotiation with the EU. Any such negotiation could only take place in the context of the broader relationship between the UK and the EU.

Compliance and enforcement

(17) We welcome the increase in trained compliance inspectors mentioned in the 2021 annual report. In response to our report the government should give further details of this increase in Inspectors, including the numbers of Inspectors employed, details of the work they are undertaking and how they are measuring the impact of the change in Inspector numbers on the Compliance Team’s work.

(18) We also welcome the internal review carried out by the Compliance Team in 2021 and changes made to the operating model to better assist the prioritisation of site inspections. We recommend that the 2022 annual report includes an analysis of the outcomes of this work.

ECJU currently has 5 trained compliance inspectors and is in the process of recruiting an additional 3. Whilst that recruitment and induction process is underway, it is currently focused on completing priority intelligence led visits.

(19) We are concerned by the increase in recent years of the numbers of companies found to be non-compliant after a revisit and the lack of information given in the annual reports on specific companies and countries for findings of non-compliance. This raises questions over the effectiveness of compliance visits.

ECJU take its compliance requirements seriously and takes a robust approach. It undertakes intelligence and risk profiling with a focus on new exporters, exporters with previous compliance concerns, or where engagement with HMRC and Border Force suggests an audit would be appropriate.

To mitigate compliance risks ECJU compliance team works closely with HMRC so that any appropriate follow up enforcement action can be properly considered by them. This intelligence led and priority focused audit approach will therefore naturally lead to higher rates of non-compliance being found, especially in routine compliance visits.

The effectiveness of such compliance visits is demonstrated by the significant reduction in non-compliance during revisits: an 86% reduction in 2019 and 2021, and 88% reduction in 2020. ECJU will also review the methodology of reporting in future annual reports to better demonstrate the effectiveness of these visits.

The purpose of compliance visits is not only to ensure compliance with open export/trade licence terms and conditions, but to also educate and inform companies on UK export control issues, recent changes to open licences and legislation, improvements to record keeping processes to facilitate responsible exports and provide general awareness on UK export controls.

(20) In response to our report, the ECJU should give greater detail and analysis on the reasons identified for companies being found to be non-compliant, especially after a revisit. This analysis should also be included in future editions of the annual report as part of efforts to improve transparency.

In terms of including additional analysis on non-compliance in the strategic export controls annual report - information provided to ECJU by exporters is subject to the requirements set out in the UK General Data Protection Regulation (GDPR) and under the law of confidentiality, as well as the provisions of DIT’s privacy notice for export control applications. These requirements prevent the release of certain information to others or into the public domain. This includes information that could identify companies that have been found non-compliant. Taking account of these restrictions, ECJU will consider how best to present information in our annual report that improves the transparency of the compliance process.

(21) Providing exporters with training will always improve compliance results and make the compliance visit process run more smoothly, particularly when companies do not export regularly. We recommend that the government actively encourage more peer-to-peer, trade bodies or ECJU awareness training opportunities.

The Committees are correct to highlight the importance of training in compliance. Under ECJU’s new structure, it will be developing a new engagement strategy, seeking more opportunities for peer-to-peer training with trade bodies, industry and academia through a variety of ECJU awareness events, online platforms, exporter events and forums.

During the pandemic ECJU moved nearly its entire outreach programme online as face- to-face engagement with stakeholders was not permitted. Training sessions and meetings were moved onto MS Teams and tutorials were recorded and uploaded as YouTube videos covering many aspects of the licensing process. This approach proved successful with regular requests for additional tailored sessions being made. Demand for these more tailored sessions remains high.

The Business Awareness Unit has since restarted face to face seminars and symposiums up and down the country, which have been well attended. For example, the October 2022 ECJU annual symposium in London attracted over 200 exporter, trade association, academia and freight company representatives. ECJU Compliance Unit provided 3 training courses on open licence usage and compliance and were one of the most popular of the eight distinct courses provided, with over 100 people attending this course alone. This was preceded by Compliance Unit presenting at the ECJU Offshore Energy Awareness course in Aberdeen in September 2022.

To support exporters in their licence journey, ECJU has also been undertaking a review and refresh of their digital presence on gov.uk and will ultimately simplify our page for exporters to access support, documents and advice in a straightforward and simple way.

(22) We are also troubled by the concerns expressed regarding the level of technical knowledge within ECJU and the reported reduction in technical experts accompanying compliance officers on compliance visits. We recommend that the ECJU ensure that technical experts accompany compliance inspectors on a greater number of visits and that the number of technical experts and level of technical expertise within ECJU be reviewed as part of the ECJU Transformation Programme.

The Committees may be pleased to hear that, whilst it was more challenging for technical experts to play an effective role in online compliance audits during the COVID-19 pandemic, compliance audits are now returning to in person attendance, and ECJU plans to reintroduce the practice of technical experts attending them where beneficial.

(23) We welcome HMRC’s increase in resources for Customs A/B. In response to our report, HMRC should set out how it will measure the impact and effectiveness of these increased resources.

The additional HMRC resources which the Committees welcomed in their Inquiry response are currently completing their training and will become fully operational in April 2023.

Measurements of performance and impact are determined by the compliance activity being undertaken. HMRC will utilise existing management information tools to measure the output of the enforcement and intelligence teams know as Customs A/B. These include the number of cases dealt with by way of criminal investigation, resolved by compound penalty or other interventions such as warning letters or educational visits. The data will also include the number of interventions at the border. This information will be provided to the Committees in the annual submission.

(24) Given the apparent low level of strategic exports and sanctions prosecutions, especially in recent years, we are disappointed that when we asked if the government had any plans to review the effectiveness of the relevant legislation, they simply stated that enforcement was a matter for HMRC. HMRC are responsible for enforcing the legislation put forward by the government and passed by Parliament. It is not HMRC’s role to assess the effectiveness of legislation. This is a matter for the government and if changes are required it is for Parliament to legislate for them.

Export control legislation is kept under regular review to ensure it operates effectively and that enforcement measures and penalties continue to apply properly. HMRC’s operational experience is a key consideration in assessing the effectiveness of the legislation and ECJU will continue to work closely with them to ensure that the controls can be effectively enforced.

(25) We can find no explanation for the lack of published data on convictions for export controls violations, especially as this information has been provided to us in written evidence when requested. We recommend that the data provided to us on individual convictions on export controls/customs violations should be included in future editions of the strategic export controls annual report.

With respect to the Committees’ comments on the lack of published data on convictions for export control violations, HMRC will provide convictions data for export control violations for inclusion in annual reports.

(26) We have noted the record compound settlement agreed in early 2022 and understand the issues surrounding the public disclosure of further information relating to such settlements. However, we see no reason why data such as the name of the company, the item being exported and the destination, cannot be provided to us privately to allow us to undertake effective scrutiny. We also recommend and expect that where unlicensed goods have reached their destination the government inform us, in private if necessary, of the steps taken to recover the items.

The Committees’ recommendation to provide data, even in a private manner, on settlements is not something HMRC can agree to. HMRC must consider the disclosure protocols within Section 18(1) Commissioners for Revenue and Customs Act 2005 whereby Revenue and Customs officials may not disclose information which is held by the Revenue and Customs in connection with a function of the Revenue and Customs.

At the hearing on 16 November 2021, HMRC informed the Committee that it does not consider that disclosing individual company names would drive compliance, promote voluntary disclosure or be proportionate in this case. Therefore, HMRC does not believe that disclosure is in the public interest.

Post shipment verification

(27) Despite the government undertaking to examine the possibility of establishing a system of post-shipment verification for UK exports, no progress appears to have been made. While we fully understand the pressures of, and the need to respond urgently to, the COVID pandemic, the lack of progress on this matter is disappointing given the concerns expressed to us in evidence regarding the inadequacy of some end-user assurance documentation and the risks posed by diversion. We see no reason why the government should not recommence its discussions with the German authorities and seek to reinstate the aborted talks with US authorities on post-shipment verification.

(28) We do not envisage a UK post-shipment system as replacing the need for stringent checks and robust application of the licensing Criteria at the application stage. Rather such a system should be seen as complementary to the pre-licence checks and equally important as even with the best pre-licence systems, there will be cases where diversion occurs and exported items are obtained by illicit end- users after their export.

(29) While recognising that it is not practicable to carry out post-shipment verification for all exports, we recommend that the government instigate a pilot programme by 2025 of post-shipment verification. This should include on-site inspections to examine the resource implications and potential benefits of post- shipment verification. We agree with our witnesses from SIPRI that a useful starting point for modelling the pilot would be consideration of the Swiss system which uses a country risk matrix and the German system which mostly inspects small arms and light weapons.

The government notes the Committees’ conclusions and recommendations. We are aware that an increasing number of governments are introducing some form of post- shipment verification but we have yet to see any clear evidence that they are effective in reducing diversion. Indeed, we agree with the Committees’ conclusions that post- shipment verification is no substitute for a robust and thorough pre-licensing assessment and that even where post-shipment verification is carried out there may still be instances where diversion occurs.

On the other hand, introducing such a system would incur significant costs, require additional resource and expertise, and raises legal, diplomatic and practical issues which must be balanced against any perceived benefits. While we retain an open mind on the issue and will continue to examine the experience of those countries that carry out such checks, we cannot commit to implementing a pilot programme by 2025.

Countries of concern

(30) We welcome the inclusion of an export controls section in the FCDO’s annual Human Rights and Democracy Report. However, consideration of human rights should also be better mainstreamed into future strategic export controls annual reports. We recommend that future strategic export controls annual reports demonstrate, by including examples, how the government takes the list of human rights priority countries into account in licensing decisions and exercising export controls.

The 2021 annual report on strategic export controls included a case study on Myanmar in relation to sanctions and human rights. The government notes the Committees’ request for further examples in future annual reports.

Each export licence application is assessed against the Strategic Export Licensing Criteria. Human rights considerations form a core part of these Criteria and our decision- making as to whether or not to approve an export licence. Criterion 2 includes considerations relating to respect for human rights and fundamental freedoms.

When considering an application, the government assesses the destination country’s attitude towards the relevant principles established by international human rights instruments (and the fact a country is or is not on the priority list will be a relevant factor in that assessment).

For each application, the government considers the specific items, the end users, and the nature of the equipment presented. Licence applications must include a detailed statement about the intended use of the goods. Decisions are based on the most up-to- date information and analysis available at the time, including specialist advice from those with diplomatic and military expertise, as well as reports from the Foreign, Commonwealth and Development Office (FCDO) overseas network, international organisations such as the United Nations, and non-governmental organisations (NGOs). The insight and analysis from a wide range of sources provides a comprehensive picture on which to base assessments and decisions on when an export licence should be granted.

The government will not grant a licence for items where we determine there is a clear risk that the items might be used to commit or facilitate internal repression, or where we determine there is a clear risk that the items might be used to commit or facilitate a serious violation of international humanitarian law. The government will exercise special caution and vigilance where a competent body has established that a country has committed serious violations of human rights. The government continues to monitor closely the situation in all countries and territories. If extant licences are found to be no longer consistent with the Strategic Export Licensing Criteria, those licences will be revoked.

(31) We note the high-level of concern that exists regarding exports to Saudi Arabia and her coalition partners of items that may be used in the conflict in Yemen. This conflict is tragic and we call on all sides to give renewed urgency to finding a solution. It is of the utmost concern that exports were made in breach of the government’s undertakings to the Court of Appeal. Lessons must be learned around the mechanisms for sharing information and intelligence between departments that make up the ECJU. We support the work of the Mills Review. However, we share concerns expressed by witnesses that this could happen again in respect of exports to other nations.

ECJU has a formal process to respond to any change in circumstance in countries for which licences have been or are in the process of being issued. Working in close partnership with the FCDO and Ministry of Defence (MOD) (and other advisory departments as required) ECJU will consider the impact on all extant licenses and any applications currently being processed against the latest intelligence available at that time. The position will continue to be regularly reviewed and communicated across ECJU at the appropriate levels.

Where required, and with ministerial approval, extant licences can be revoked and any applications currently under consideration can be paused and/or refused. This can happen very quickly – for example following the 24 February invasion by Russia into Ukraine, ECJU, working in partnership with HM Revenue and Customs (HMRC), suspended and started revoking licences within 24 hours.

As part of the ‘Change in Circumstance’ process, ECJU works closely with HMRC and Border Force to ensure they can put in place any measures they need to capture goods at the border.

Any licence application to a country of concern will be routed within our IT system so as to require counter-signing by a licence unit manager within ECJU DIT prior to being issued. In addition, the application will have also been seen by at least one member of ECJU FCDO and ECJU MOD staff (and other advisory departments as appropriate). All these checks and balances ensure licences are only issued after careful consideration against the Strategic Export Licensing Criteria by all the relevant departments with ECJU.

(32) By the end of 2022, the government should commission an independent examination of whether the Mills Review outcomes have been successfully implemented and have led to the intended outcomes. It is vital lessons are learned so as to not see a repeat of this in respect of other countries of concern. In response to our report the government must include a full explanation of its reasons for its decision to resume such exports and an explanation for its decision to cease referring all such exports to ministers for decision.

Following the publication of the Mills Review, as well as a number of other internal reviews on ECJU’s processes and governance, the GIAA worked with ECJU for 18 months to ensure a number of governance and process reforms were implemented. The GIAA are in the final stages of concluding this process now that ECJU has completed all of the GIAA’s recommendations. The government is satisfied that the GIAA has provided adequate scrutiny of ECJU’s reforms following the Mills Review.

(33) We are concerned that previous exports to Saudi Arabia may demonstrate an inconsistency in the application of the previous Consolidated Criteria. In response to our report the government should set out its reasons for deeming that such exports are not in breach of the Criteria. The government should also set out its assessment of the impact of the new Strategic Export Licensing Criteria on exports to Saudi Arabia.

The government’s approach to licensing the export of equipment to Saudi Arabia that might be used in the conflict in Yemen was subject to extensive and detailed review by the Divisional Court in 2017 and then by the Court of Appeal in 2019. The central issue in this context is Criterion 2c of (what was then) the Consolidated EU and National Arms Export Licensing Criteria – that the government will not grant a licence if there is a clear risk that the items might be used in the commission of a serious violation of international humanitarian law (IHL). This necessarily requires a predictive evaluation of risk as to the attitude and future conduct of Saudi Arabia, while incorporating a detailed and careful review of past allegations of incidents of concern.

The Divisional Court found that the government’s decision-making processes were “rigorous and robust” involving a multi-layered process of analysis. While the Court of Appeal broadly endorsed this decision-making process it found that the government could and should have gone further in determining whether there was a historic pattern of breaches of IHL. The Court of Appeal concluded that because the government had not reached findings on whether specific incidents constituted breaches of IHL as part of our assessment of clear risk, under Criterion 2c, our decision-making process was irrational, and therefore unlawful.

To address the Court of Appeal’s findings, a revised methodology was developed for assessing allegations of incidents of concern. This methodology was set out in detail in the then Secretary of State for International Trade’s Written Ministerial Statement (WMS) of 7 July 2020. While the resulting analysis has identified a small number of incidents as possible violations of IHL it has not identified any pattern of violations – they are assessed to be isolated incidents. It is on that basis that the government concluded there was not a clear risk that the export of arms and military equipment to Saudi Arabia might be used in the commission of a serious violation of IHL and it therefore resumed considering applications on a case-by-case basis.

As the Committees are aware, the decisions announced in the 7 July 2020 WMS are themselves the subject of judicial review proceedings, with a hearing scheduled for 3 days beginning 31st January 2023.

The government does not expect the new Criteria to have any impact on export licensing for Saudi Arabia. As already noted, the key criterion in this context is Criterion 2c. The only substantive change to Criterion 2c was the addition of the word “facilitate” - the government will now not grant a licence if it determines that there is a clear risk that the items might be used to commit or facilitate a serious violation of international humanitarian law. This change reflects long-standing practice and is consistent with our obligations under the Arms Trade Treaty.

(34) We commend the UK government for voting in favour of renewing the mandate of the Group of Experts on Yemen. However, we are alarmed that the majority of international delegates voted to end the mandate. We urge the government to seek to work with international partners to reverse this decision as soon as possible so that this valuable independent work can continue.

As the Committee notes, the UK government voted in favour of extending the mandate for the UN Group of Eminent Experts on Yemen and was disappointed when the mandate was not renewed. We will continue to discuss with international partners the potential for a follow-up mechanism to support human rights accountability in Yemen.

We call on all parties to the conflict to conduct full and fair investigations into claims of human rights and international humanitarian law abuses and violations.

(35) While we fully support the government prioritising the evacuation of people over the repatriation of equipment, we are concerned about reports of military items that are now in the hands of adversaries following the withdrawal of coalition forces from Afghanistan. We support the decision to remove Afghanistan as a permitted destination for 5 open general export licences. However, we are concerned that this decision was not taken earlier given the warnings and indications that the Afghan government would collapse. A key test of the export control system is the ability to adapt to changing situations. We support the continuation of licences for humanitarian demining equipment for NGOs and items for the protection of remaining diplomatic missions and the government’s commitment to keep the situation under review.

In August 2021, when it became clear that the situation in Afghanistan was changing, all extant export licences and those in application for Afghanistan were reassessed quickly. All licences are kept under careful and continual review as standard. The government is able to suspend, refuse or revoke licences as circumstances require. This included considering the risk of diversion to the Taliban. All licences for exports to the Afghan National Defence and Security Forces were revoked and Afghanistan was removed from relevant open general export licences. Licences for NGOs, humanitarian organisations, and diplomatic missions were left in place, as required, in support of their activities up until the point of departure, following an assessment of the risk of diversion.

All licences are kept under careful and continual review as standard and all new licence applications will be assessed against the strict criteria as usual. A number of licences have been issued for NGOs and humanitarian organisations working in Afghanistan since September 2021.

(36) While the priority should always be the safety and evacuation of people, we seek assurances that the government plans for the risk of military items falling into the hands of adversaries when undertaking operations, especially when planning the withdrawal from conflict zones. In response to our report, the government should set out the mechanisms in place to do so and what lessons have been learned from the withdrawal from Afghanistan.

Prior to withdrawal for Afghanistan, the government gifted the following equipment to the United States: 5 minibuses, 3 coaches, 1 forklift, 84 sets of public order kits (shields and batons only), plus rations and water.

The government conducts rigorous assessments of the risks associated with gifting of controlled goods. These assessments consider any risks associated with battlefield loss.

(37) We welcome the government’s swift action on exports to Hong Kong following the Chinese government’s decision to impose a National Security Law there. This illustrates how an export control system should work; by being adaptive to changing circumstances and the heightened danger of such exports being used for internal repression. The government should use this as an example of best practice and examine the lessons that can be learned for situations where the response has not worked as effectively and speedily, for example in Afghanistan.

The government note the Committee’s comment that we acted to bring our export control policy for Hong Kong in line with our policy towards China. Following the events of June 2019, licensing for exports to Hong Kong was restricted with an announcement to Parliament. In addition, there was uncertainty over how the National Security Legislation would impact the operational independence of the Hong Kong Police and correctional services.

In June 2019, the UK responded rapidly, making regular statements to Parliament which included introducing a ban on licences for crowd control equipment to the Hong Kong Police. Following the ban, there were no extant or open licences for crowd control that required revocation and a small number of open general licences and transhipment licences were amended. In July 2020, the Partial Arms Embargo from mainland China was extended to Hong Kong. Companies were made aware of developments through regular contact and, alongside the announcement to Parliament, a formal notice to exporters.

The government recognises the importance of applying lessons learned when developing our approach to changes in circumstances. We can and do respond quickly and flexibly to changing or fluid international situations. All licences are kept under careful and continual review as standard. We are able to suspend, refuse or revoke licences as circumstances require. In recent years we have revoked licences for Russia, Myanmar, Belarus, Venezuela and Afghanistan. This shows how seriously we take the guiding principle of responsible export controls.

(38) We welcome the government’s action in October 2019 to not grant further export licences to Turkey for items that might be used in military operations in Syria. However, we are concerned that no information was given on action taken in respect of exports for which licences had already been granted.

As part of our review of Turkish military operations and activities in North-East Syria, the government assessed each export licence application on a case-by-case basis, including extant licences. If a licence were judged to be no longer consistent with the Strategic Export Licensing Criteria, the government would have revoked the licence. The government keeps export licences under careful and continuous review, and we will take action to refuse or revoke licences in line with the Criteria if circumstances require.

(39) In response to our report, the government should set out the steps it took in respect of licences already granted prior to the October 2019 announcement. In the interest of transparency, the government should also provide details of the additional assessments that were made and the factors taken into account in decision making in respect of exports to Turkey following its 2019 announcement. The government should also set out the rationale for its December 2021 announcement that it is satisfied that decisions on all licence applications to Turkey can be taken, following a careful assessment against the Strategic Export Licensing Criteria on a case-by-case basis.

As part of the review announced in October 2019, all export licence applications for Turkey that might be used in military operations in Syria were carefully assessed against the Criteria on a case-by-case basis. No further export licences to Turkey for items which might be used in military operations in Syria were granted while that review was conducted. The in-depth review concluded in December 2021, putting us in a position to make assessments on applications. The review also took into account the changes to the Strategic Export Licensing Criteria published in the Written Ministerial Statement of 8 December 2021.

The assessments for this review focused on Criteria 2 and 4. Under Criterion 2, consideration of violations of human rights and international humanitarian law forms a core part of the assessment of export licences and provides a key factor in the approval or refusal of a licence. The government will not grant a licence if it determines there is a clear risk that the items might be used to commit or facilitate internal repression or a serious violation of international humanitarian law. In addition, special caution is exercised in granting licences to countries where serious human rights violations have been established by competent bodies of the UN or the Council of Europe.

Under Criterion 4 of the Strategic Export Licensing Criteria, the government will not grant a licence if it determines there is a clear risk that the items would, overall, undermine peace and security. When assessing the potential that the items would either contribute to or undermine peace and security, the government took into account a range of factors, including - where relevant - humanitarian purposes and impacts, the nature of the conflict including the conduct of all other states or actors involved, as well as the border stability and legitimate national security interests of the recipient.

The Criteria provide a thorough risk assessment framework which requires us to consider thoroughly the possible impact of providing equipment and its capabilities to specific end users. The decisions for all destinations, including Turkey, are made as a result of careful assessment and are consistent with the Strategic Export Licensing Criteria.

(40) We welcome the sanctions put in place following the annexation of Crimea in 2014 and the invasion of Ukraine in 2022. However, it is unacceptable that the EU sanctions legislation in 2014 included a prior contracts clause permitting licences where the export concerned the execution of an obligation arising from a contract or an agreement concluded before 1 August 2014. In response to our report the government should set out the lessons learned from this incident and how it will ensure this situation is not repeated. Following the UK’s withdrawal from the EU it will be necessary to coordinate efforts with the EU with regards to Russia and Ukraine and future crises.

The sanctions adopted by the EU in 2014 were subject to negotiation and required a consensus of all member states. Since our exit from the EU, the UK adopts sanctions using the powers in the Sanctions and Anti-Money Laundering Act 2018 (although EU sanctions relating to the trade in goods continue to apply in Northern Ireland by virtue of the Protocol on Ireland/Northern Ireland in the Withdrawal Agreement). The government considers that it may be appropriate to provide a time-limited prior contracts clause to enable companies to wind down their business in an orderly fashion. In such cases, licences would only be granted where to do so would be consistent with the object and purpose of the sanctions.

The grounds on which licences may be granted under the UK’s Russia sanctions regime are set out in detail in statutory guidance.

The UK has worked very closely with international partners, particularly the US, the EU and through the G7, in our response to Russia’s illegal war of aggression against Ukraine. This has included, where possible and appropriate, aligning our sanctions measures with those of the EU, including in respect of any exemptions or wind-down periods.

(41) We are very concerned about continuing reports of UK components being found in Russian systems. In response to our report, the government should set out the actions it is taking, in conjunction with allies to close down Russia’s ability to acquire replacement foreign-made components that are critical to its systems. The government should also give further details of the recent revision to UK military end use controls that will provide additional scope to control the export of items not on the lists of items subject to an export licence to destinations subject to an arms embargo.

The government shares the Committees’ concerns, but we would emphasise that these reports have been about commercial and industrial components which are not subject to export controls, and which are widely available from suppliers around the world.

However, working with international partners we have taken steps to impose the largest and most severe package of economic sanctions that Russia has ever faced, to maximise the impact on Russia’s campaign in Ukraine and cut off funding for Putin’s war machine, which includes prohibition of the export, supply and delivery and making available of restricted goods, software and technology and the provision of certain services related to the export or supply of these products. We also continue to work closely with international partners to fully implement and enforce these sanctions.

On the military end-use control, the limitations in the existing control that we inherited from the EU meant it was never fully effective at controlling non-listed items which were destined to be used by the military or security forces in an arms-embargoed destination and whose export posed a risk to UK national security or regional stability. In particular, it only applied to components that were intended for incorporation in, or goods and technology for development or production of, military-list items. It did not apply to export of complete items that were intended for use by the military or security forces of an embargoed destination or were intended for the development of military capabilities more generally (rather than development of specific equipment).

The changes announced by the then Secretary of State for International Trade on 8 December 2021, and which came into force on 19 May 2022, amended the definition of “military end-use” so that the control now applies additionally to non-listed items that are intended for use by military forces, para-military forces, police forces, security services or intelligence services in an embargoed destination, or are intended for an entity involved in the procurement, research, development, production or use of dual-use items on their behalf.

To ensure the control does not have disproportionate effects on legitimate trade we will only apply the control where the export of the items could:

• have an adverse effect on the national security or the security of members of the armed forces, of the United Kingdom (or any dependency) or any other friendly state
• have an adverse effect on peace, security or stability in any region of the world or within any country
• facilitate acts threatening international peace and security; acts contravening the international law of armed conflict; internal repression in any country; violations of human rights; or acts of terrorism or serious crime anywhere in the world

The control can only be applied where the government informs the exporter that the proposed export is or may be intended for a military end-use in an embargoed destination. In addition, there are exemptions for medical supplies and equipment, as well as for food, clothing and other consumer goods generally available to the public and sold from stock at retail selling points without restriction.

At the same time, we took the opportunity to correct the long-standing anomaly of China being subject to an arms embargo but not being subject to the Military End-Use Control. This anomaly arose from a combination of the way the EU arms embargo was imposed in 1989 and the wording of Article 4 of the EU Dual-Use Regulation. To correct this, we added China, including Hong Kong and Macao, to the list of “embargoed destinations” in Part 2 of Schedule 4 to the Export Control Order 2008.

(42) We acknowledge that the decisions regarding the sanctions imposed on Russia in 2014, that made the export of specified equipment for use in the oil industry in Russia subject to a licence, were made at an EU level. However now the UK has left the EU, in response to our report, the government should set out the current UK measures in place in relation to the oil and gas industry in Russia and also provide data on the number of licence applications granted and refused for exports to Russia in relation to oil and gas since the invasion of Ukraine took place.

The measures applying to energy-related goods that came into force in 2014 continued to apply after the UK’s withdrawal from the EU under the Russia (Sanctions) (EU Exit) Regulations 2019. On 21 July 2022 these measures were amended by the Russia (Sanctions) (EU Exit) (Amendment) (No. 14) Regulations 2022. As of that date the export, supply and delivery, and making available of energy-related goods to or for use in Russia, and the provision of services related to the export or supply of energy-related goods, has been prohibited. In certain limited circumstances a licence may be granted, as set out in statutory guidance.

In addition, on 14 April 2022 the Russia (Sanctions) (Amendment) (No. 8) Regulations 2022 added oil refining goods and technology as categories of “restricted goods” and “restricted technology” which are prohibited for export to or for use in Russia.

69 licences for energy-related goods and related services were granted between 24 February and 30 June 2022. Information on the number of licences granted after 30 June 2022 will be published as official statistics in due course.

(43) We accept the government’s assertion that it keeps all licences under review and that they have the power to suspend, refuse or revoke licences as circumstances require. However, we also accept the considerable and longstanding concerns over arms exports to Israel especially where they might be used in the Occupied Palestinian Territories. In response to our report, the government should provide us with a detailed breakdown of licences granted for exports to Israel, including any end use conditions. The government should also provide details of licences that have been refused, suspended or revoked and the reasons for this action. We also recommend that exports to Israel are included as a case study in the next strategic export controls annual report.

In relation to arms exports to Israel, please see Annex 1 which contains details of licences issued, refused and revoked covering a 5-year period from 1 July 2017 to 30 June 2022. The information includes types of goods and the number of licences the were granted/refused for each.

Export licences only contain conditions that apply to the exporter, but do not contain any conditions that apply to the end-user about how they might use the goods once exported. OIELs can contain conditions that might restrict exports to certain sectors, for example to repair facilities or to energy sectors. Standard Individual Export Licences (SIELs) do not have such conditions as they permit the export of specific items to specific end users.

When the time comes to decide which countries it would be best to include in the 2022 strategic export controls annual report, ECJU will consider the Committees’ suggestion of Israel.

Future technological developments and the character of conflict

(44) The quickening pace of technology advancements and the expected changes in the character of conflict will require swift and holistic action to ensure that the current international approach to technology governance remains fit-for-purpose.

(45) The government should review the impact of technological change and the evolution of the character of conflict and in its response to this report outline what changes it believes are necessary to make to current international agreements and arrangements on the control of the military and dual-use items. The government should also provide us with regular updates on the outcomes of the relevant international, bilateral and national fora that are responsible for these matters.

The government works with our allies, through our partnerships and multilateral alliances, to ensure that the development and use of technology promotes our shared values of freedom and democracy at home and around the world. The government recognises it cannot act alone to achieve governance and controls on certain emerging technology. The government continues to work within the existing multilateral export control regimes to develop and improve control listings for dual-use items which present risks to national security, international security; or could be used to facilitate or commission human rights abuses or proliferate weapons of mass destruction. The government is focused on strengthening export control regimes and increasing their responsiveness to the evolving geo-political environment and accelerating technological change. These efforts form part of broader diplomatic activity to buttress the international arms control and non-proliferation system.

(46) The rapid advancement of new technologies such as spyware is a major challenge for export control regimes. Given the government’s assertion that it is inappropriate to move intrusion software and related licensable goods and technology into Category A of the UK’s trade controls system, in response to our report the government should set out what action it is taking to address human rights concerns associated with surveillance technologies. The government should also set out what action it is taking to ensure global human rights compliant regulatory frameworks are in place for such technologies.

All licensable items are assessed rigorously against the Strategic Export Licensing Criteria, in particular, Criterion 2 which addresses whether there is a clear risk that the items might be used to commit or facilitate internal repression. The UK is committed to the lawful and proportionate use of cyber capabilities, supported by independent oversight, anchored in domestic and international law. Responsible sale and use of surveillance technology is an important element of responsible, democratic cyber power as detailed in the UK’s Integrated Review 2021 and our recently published National Cyber Strategy. The government agrees that there has been a concerning trend in recent years that has seen the widespread sale and use of high-end cyber capabilities in ways that undermine human rights.

The UK National Cyber Strategy commits us to tackle this and the growing challenge it creates for a free, open, peaceful and secure cyberspace. We are working with international partners to set the ‘rules of the road’ that govern a free, open, peaceful and secure cyberspace, including when it comes to surveillance technologies, and to ensure there are appropriate safeguards around the export and use of such technology.

One of the key ways the government is doing this is through the US-led Export Controls and Human Rights Initiative established as part of the Summit for Democracy in December 2021. Through this initiative, we are working with partners to establish a Code of Conduct on export controls for ‘Goods and Technology That Could be Misused and Lead to Serious Violations or Abuses of Human Rights’, including intrusion and surveillance technologies. We look forward to engaging further with the international community on this important issue, to ensure that cyberspace remains a safe and prosperous place for everyone.

Annex 1 to the First Joint Report to the Committees on Arms Export Control Session 2022 to 2023

See the pdf version of the government response to the CAEC report on UK strategic export controls for the table in Annex 1.