Oral evidence: Use of UK-manufactured Arms in Yemen HC 928Wednesday 13 April 2016
Oral evidence, 13 April 2016.
Witness
Paul Everitt, Chief Executive Officer, ADS, gave evidence.
Chair
Thank you, everybody. I thank members for coming back as quickly as possible. Paul, thank you for coming in front of the Committee. Could you introduce yourself and the organisation you work for and give us a bit of background?
Paul Everitt
Thank you very much for the invitation to come along today. My name is Paul Everitt. I am the chief executive of ADS Group, which is the national trade association for the UK’s aerospace, defence, space and security industries. I am also the chairman of Farnborough International Ltd, which is a wholly owned subsidiary of ADS that, among other things, organises the Farnborough international air show. ADS has around 950 members. We would class around 850 of those as SMEs. The rest are a mixture of mid-caps and global multinationals. Most of our members, in one way or another, are regular users of the export control regime. As an organisation we help and support companies to promote their services and equipment to international markets. We do that predominantly by organising what we would call UK pavilions at major international aerospace, defence and security exhibitions around the world, but also by working closely with UKTI Defence and Security Organisation on facilitating either missions to key countries or inward visits to the UK. As an organisation we play a key role in a number of the governmental initiatives to promote manufacturing, particularly the aerospace, defence and security growth partnerships, which are looking specifically at how we in the UK work to develop a proposition that gives us a greater opportunity to garner a greater proportion of growing civil aerospace, defence and security markets around the world. We believe that our sector is an important part of the UK economy, particularly our manufacturing economy. We provide high-value, long-term jobs, significant investments in skills development and, in particular, innovation and R and D, and, of course, apprentices, who are a core part of our industry.
Mrs Grant
Good afternoon. Can you tell us in general how stringent are the controls on export of defence equipment imposed by the UK Government?
Paul Everitt
The UK export licensing regime is widely regarded as one of the most robust and transparent operating around the world. For many international organisations, it is held up as the benchmark for international best practice. We feel that the level of scrutiny of each individual export licence application—the process that is undertaken and the process that sits behind it—is robust. The fact that, where licences are granted, all the information is open to public scrutiny and questioning makes it a very robust and stringent regime.
Amanda Milling
You mentioned that you represent a range of companies of different sizes, from multinationals to SMEs. I was wondering whether the UK Government’s arms export control policy affects different types of companies in different ways, and how it does so and what that means in practice.
Paul Everitt
The licensing regime is applied in a consistent fashion across the industry, irrespective of the scale or size of the business. The experience of different sizes of organisation varies. Clearly, larger players—particularly those who may be involved in the export of platforms, be they combat aircraft, helicopters or substantial systems—will be better resourced and will deal on a more strategic level with both the UK Government and the purchasing Government. Smaller businesses export either niche technologies or equipment that forms part of more sophisticated or specific products. I would not say that their marketplace is haphazard, but they respond to and pursue particular inquiries that come to them. For them, that is a more major task. Their experience with the export control regime and the Export Control Organisation is a bit more transactional. They are trying to get responses to the applications that they are making. Their focus is on things like how long it takes and what the bureaucracy level is. The larger businesses see it as one of the strategic steps along the route to successful completion of business.
Amanda Milling
On that basis, if the smaller companies do not necessarily have the resources in-house, who provides guidance in terms of policy?
Paul Everitt
As an organisation, we provide training. We work closely with the Export Control Organisation to provide training for companies, so that they understand the obligations, the information requirements and all the various elements that they need to put in place. One of the things we have been pushing for over a significant period of time is better availability of advice. While it is absolutely appropriate that licence applications should be assessed when they are made, if smaller businesses know that they have equipment that is classified as either high or low risk, and/or that their potential market, from which they may have received an inquiry, is high or low risk, that will condition what their expectations are and whether they decide to pursue that business. We believe that having better information up front would be helpful. As an organisation, we try to provide some of that, but we are not in a position to handle all the sorts of questions that might arise about particular pieces of equipment and technology.
Amanda Milling
You say that you are pushing for more information to be provided. Who are you pushing to provide that information?
Paul Everitt
The Export Control Organisation. We want it to have a more advisory function so that, ahead of the point when someone either starts the process of thinking about marketing a product in a particular territory or receives an inquiry, they can discuss with somebody whether it will be high or low risk and whether it will cause a lot of problems. I do not think that anyone is expecting absolute certainty, but there could be some advice that helps to condition people. If they know that they are dealing with something that is problematic, either because of the technology or because of the country, they know that the process may take longer, involving more resource and, potentially, an unsuccessful outcome. It is better that they know that before they start the process, rather than midway through.
Mr Evans
I want to follow on from Amanda’s questions. In your experience, do you ever get the sense, when you are talking about much larger companies—BAE Systems, for instance, because we are talking about Saudi Arabia and arms exports—that a Government are more likely to look at their shoes and be a little more lax, because of the value of an order, than they would be for a much smaller company, where they can be a bit stricter, because the value of the order is not that high and not as many jobs are at stake?
Paul Everitt
No. I am fairly comfortable and confident that the regime is applied in an even-handed way, whoever is making the application.
Mr Evans
What makes you confident that that is the case, in your experience?
Paul Everitt
No experience that we have had to date suggests otherwise. I have had anecdotal conversations with various companies that are having trouble going through the export control process; it is taking time because it is being considered and assessments are being made—that kind of thing. There is no sense that one group of people are waved through and others are not. It is applied uniformly.
Mr Evans
You do not get the sense that simply because there are massive numbers of jobs and exports of huge value, they would be less strict on a bigger company than on a smaller one.
Paul Everitt
That is correct. I am confident that there is uniform application of the rules. We see it in two separate boxes. Clearly, defence exports are really important. They are important in underpinning international relationships. There are elements of interoperational activities with some of our allies. There is also a domestic benefit, in terms of sustaining capability and, in some cases, reducing cost for the UK taxpayer, in having export customers. Government are keen to support our defence export activities, but there is a very clear regulatory process. Once the business has been done and companies begin the process of applying for licences, that regime is implemented and uniformly applied.
Mr Evans
It is strict, and there is no sense that, “Oh, they could go to the French or the Canadians to get the same kit.” It is absolutely strict, irrespective of the fact that people could source elsewhere.
Paul Everitt
Yes. In terms of the regulatory process, it is as you have said. We are after business. There is strong support from Government, and we are always looking to see how we can do things better and be more competitive, but once we move over the line into that regulatory regime, the world is very different.
Michelle Thomson
Could I press a little more on this? I just want to tighten up the language from “do not get the sense”. Are you saying specifically that in all circumstances, regardless of the length of the relationships and the value add, in terms of the bottom line, to your company, there can never, ever, ever be any difference in the rigour with which the process is applied? Are you saying 100% that that will never, ever occur?
Paul Everitt
I am confident that it is uniformly applied.
Michelle Thomson
How confident?
Paul Everitt
I am confident. I am not aware of any circumstances where it has not been uniformly applied.
Michelle Thomson
You are not aware of any circumstances. I suppose what you are conceding, if you do not mind my putting words in your mouth, is that there may be circumstances where that has applied of which you are not aware.
Paul Everitt
Okay. Yes.
Michelle Thomson
Possibly.
Paul Everitt
Clearly there are things I will not be aware of. My general experience, and the general experience across the sector, is that this is a pretty tough, carefully policed, stringent and robustly applied regime, whoever you are and whatever the value of the exports that you are doing.
Michelle Thomson
I have a last wee question. I am asking this from a business background. When there is a theoretical risk in a process where you have these repeating relationships, particularly where it is a large business, you often test that process where there might be gaps, just through familiarity. How many spot checks do you do routinely? Is that part of your procedures?
Paul Everitt
ADS as an organisation does not apply for export licences. We represent people who do, so we can only gather information from people who are operating within the system. What I give you is the knowledge and input that they provide.
Chair
I am sorry to change the sequencing slightly, Iain. Stephen has a question.
Stephen Doughty
I apologise for the fact that I have to leave shortly. I want to ask a specific question about the response of the industry and particular companies to the allegations that have been made and to the legal opinion that we heard earlier today from Professor Sands. What has been their reaction to suggestions that the UK is in breach of its legal obligations and that some licences may have been granted in error? I want to ask you specifically about MBDA. Are you aware of any response from them to the allegations about the use of, I think, a Hakim 500 missile that was found in an attack on a ceramics factory in which civilians died?
Paul Everitt
I am not aware of any specific comments that have been made by companies in respect of the issues that you raise. Our general approach, under the export licensing regime—we are a regulated sector—is that we look to our regulator for the judgments and decisions that it makes, and we respect those. In circumstances where it approves a licence, we take that at face value. Where it refuses a licence, similarly, we take that at face value. We recognise that we are operating in an environment where those decisions might change. If they do, we respect those decisions and act appropriately.
Stephen Doughty
Essentially, you are entirely Government-led. It is not the case that an individual company might have its own view on an issue and might think that the Government should have granted a licence that they did not, or vice versa. There has not been feedback in the system at certain points.
Paul Everitt
There may always be occasions when people feel that a licence should have been applied, but we take the same approach, which is that there is a regulator and a set of regulations. It is the decision maker, and we respect those decisions.
Mr Wright
I want to follow the line of questioning that Amanda started. To what extent should defence manufacturers have regard to the end use of their equipment when they sell for export, or is it a case of abdicating that to the regulatory regime? Is that regulatory process good enough?
Paul Everitt
The regulatory process requires very specific information about where it is going—to which country it is going, to whom in that country it is going and to what end use it will be put. We have to make that information available and be very clear on what it is. Then it is for the regulatory regime to make a judgment on whether or not that is appropriate.
Mr Wright
In terms of what the defence industry does, it provides that information, which is then evaluated, assessed and, ultimately, decided on by the regulatory process. I am not trying to put words into your mouth, but that works consistently and adequately.
Paul Everitt
Yes, I believe so. Because of the regime that we have, there is a level of transparency. From time to time, there are spikes of interest in what is happening in particular countries. I am not aware—I must be careful what I say here—that it has been evidenced that things that have been given permission for use in particular circumstances or for particular end users have found their way into being used in other ways. That is a reflection on the fact that it is a robust regime.
Chair
How would you describe your relationship with Government, in terms of defence exports?
Paul Everitt
We work very closely with Government on defence exports. We would see two major relationships. Our predominant one would be through the Department for Business, with UKTI Defence and Security Organisation, which is the predominant organisation for engaging with foreign Governments and identifying market opportunities that may be appropriate for UK businesses. This reflects changes that were signalled in the strategic defence and security review. Clearly, the MOD has always had some involvement, but it now has a core requirement around defence exports, predominantly around three major product types: Typhoon campaigns, complex weapons and F-35 avionics. It has a wider remit, which we interpret as being greater willingness to engage with potential customers to provide insight, experience and guidance on the use UK military forces put that equipment to, how it is managed, how it is supported in theatre and what kind of procurement processes they go through. We work very closely with UKTI and the MOD. As I have articulated, we have a slightly separate relationship with the Export Control Organisation, in its regulatory capacity.
Chair
How visible to ADS is the work of UKTI or the BIS Department on what future projects or programmes could be going on?
Paul Everitt
The work that we are doing through the defence growth partnership is a key part of the work we are trying to focus on. We recognise that back in 2008 and 2009 many countries around the world saw recessions and consequent budget cuts. Those impacted particularly on domestic defence spending, not just in the UK but in a variety of other nations. Each and every one of them decided that their route to success—to make up the gap, so to speak—was to export, so export markets are and have become incredibly and intensively more competitive. We are always looking for opportunities to raise our game. Government are part of that process. That is part of the work that the defence growth partnership is doing, particularly to try to differentiate what we in the UK offer. We are trying to present an understanding of the future challenges that countries face and to work on the innovation and technology that will both satisfy key demands here in the UK and, as a consequence, be attractive to some of our key international partners and allies.
Mr Wright
You will be aware that in the BIS Select Committee we are looking at exports and the role of UKTI. I have two questions. The defence industries are a significant part of the British economy, with turnover of £30 billion, exports of £12 billion, 230,000 directly employed people and 6,500 apprenticeships. They are a big part of what the economy does. How much of that is reliant on exports to Saudi Arabia?
Paul Everitt
We would say, as an industry, that we need a number of streams of business. Our primary stream of business is our domestic customer. Overwhelmingly, the UK defence industry’s No. 1 customer is the UK. That is predominantly what we do. However, defence spending can be lumpy. Big projects do not come along all the time, so collaborative work with international partners and exports play a part in our business. We see exports on a number of levels. From a governmental point of view, defence exports are part of the way in which we develop some of our strategic international relations. There is a sense that very few nations operate in combat situations alone, so exports provide a basis for interoperability, which is beneficial to many. Exports are also beneficial to the UK armed forces, because they mean that we can sustain capability and readiness at a level that we would struggle to do if we were only supplying UK demand, and at a cost that is lower than it might otherwise be. If I am answering your question—
Mr Wright
No.
Paul Everitt
Saudi Arabia and exports are very important, but as part of a range of business streams that we, like any industry, need to have.
Mr Wright
How assertive are UKTI in this? Do they say to you and to your members, “The middle east is a good area. Saudi Arabia is a good customer. Given what you do, we will help you make sure that you get your licence”? Does it work like that?
Paul Everitt
No.
Mr Wright
How proactive are UKTI?
Paul Everitt
Under no circumstances would UKTI even get involved in that kind of discussion. UKTI’s role is to work together with industry on identifying where key market opportunities are—which countries have large or increasing defence spend and whether that spend is likely to be in areas where the UK has key capability. UKTI would then look to facilitate engagement and meetings with key people and decision makers in those Governments. That is their role. They do not get involved in or seek to facilitate export licences.
Mr Wright
I go back to the line of questioning that Amanda started. You mentioned advice and information. UKTI would not provide that advice and say, “Based upon what you do as a defence manufacturer, I think you can get a licence.” It would not work like that.
Paul Everitt
No. They might have a view, but they would not present themselves as being a set of advisers. To a certain extent, that is why we have been pushing the ECO. You need an appreciation of the broader context—both the legislation that exists and different perspectives on countries and the relationships within them.
Stephen Twigg
You said earlier that there are spikes of interest in particular conflict situations in different parts of the world. The humanitarian crisis in Yemen and the impact of the conflict, including the Saudi-led coalition’s military strategy, have had a reasonable amount of coverage in the recent period. Has that coverage had any effect on your members’ views on exporting arms to Saudi Arabia?
Paul Everitt
It is as I reflected earlier. This is not a specific comment related to this particular conflict. As an industry, we have to operate within some sense of certainty, if that makes sense. The way we do that is to say, “We have a regulatory regime.” As individual companies, we make a decision about whether or not we wish to sell overseas the products that we are producing and in which markets we wish to sell them. That is a decision that companies make. Once they have made that decision, have applied for a licence and are in goal, they have crossed a line where responsibility has to sit with the Government and those who are making the key decisions.
Stephen Twigg
Do you not accept that there is a reputational issue? We have received evidence from experts and others on the reputational effect on the UK and the UK Government of the alleged violations of international humanitarian law by the Saudi-led coalition. Is there not also a reputational issue for your industry?
Paul Everitt
As an industry, we are very aware of our reputation, as we are aware of the UK Government’s. As we indicated in our submission, you can look at the judgments that are being made by international organisations. We quote Transparency International, which is clear in its endorsement that the UK has a robust and rigorous arms control regime and that UK businesses, in particular, are companies that operate to high standards. I am not sure that I am answering your question directly, but I am giving you a strong indication. Earlier there was talk of the arms trade treaty. As an organisation and an industry, we are active supporters of that treaty. We see it as very important in ensuring that there is control of the proliferation of arms. We believe that those who operate in an appropriate way will, in the fullness of time, be better positioned in a marketplace, because of their appropriate behaviour.
Stephen Twigg
Basically, you are saying that you rely on the strength of the regime—decisions made by the Government—rather than any sense of your members having some responsibility themselves to look at allegations and to push humanitarian views.
Paul Everitt
As we heard from the previous speaker, this is quite a confused, complex area. Our judgment is that the UK Government are best placed to have access to the best quality of information on which to make decisions.
Chair
At some point in the future, we may ask you to let us know your thoughts on the arms trade treaty. Michelle has the last question.
Michelle Thomson
I will follow on from Stephen. We have been touching on the broader context of legislation, and you have, of course, to adhere to domestic and international regulations. If you were to have a role reversal and were suddenly to be in charge of arms control policy, how would you suggest that the arms control policy of the UK could be improved?
Paul Everitt
I would not have any suggestions on policy itself. When you look around the world, the regime that we operate in the UK can be tested against any other regime and seen to be pretty effective, strong and robust. There are some elements within it, in terms of operation, that we would certainly look to improve. Earlier, I mentioned advice to companies before they start the process. A high number of export licence applications—something like 50%—get returned for further information. We have pushed very hard to say that we should analyse why. Is it because the people who are filling in the applications are not very good at filling in the forms? If that is the case, there is a role for training, with which we as an organisation would be very happy to help. Is it because the forms and processes are not clear or because the information that is being asked for is not being asked for in an appropriate way? Those are areas where we could certainly make further improvements. The other area that we have highlighted is the use of open, general export licences, which are available. There are about 50 in use in the UK. They are predominantly for low-risk products, going to low-risk markets. We think that a further drive to expand the use of open, general licences would mean that far more time and resources were available for more contentious issues, which would mean that those issues were processed more quickly. For many businesses, particularly small businesses, that is their biggest bugbear. We have been aware of situations where a company has been approached by an international Government that would like to purchase some equipment, the company has applied for a licence and that has taken so long that the Government have said, “Actually, we will buy from somebody else.” It is about making the system work more quickly and efficiently, so that, if there is a problem and an application is going to be refused, it gets refused, but, equally, if it is going to get through, it gets through. It should be done in a way that is more business friendly and works on more reasonable timetables.
Michelle Thomson
I can accept what you are saying in terms of business process, the time involved and, therefore, the cost, particularly to smaller businesses. To finish off on that, based on your vast knowledge of companies from BAE Systems right down to SMEs, are there any areas where you think that the process could be more stringent, rather than more effective?
Paul Everitt
I do not have any suggestions to offer, I am afraid.
Chair
Can I come in on that? You represent a number of different organisations, which work through a number of different countries’ systems. Do you think that our system is more stringent and robust? How do we measure up?
Paul Everitt
Our sense of this, reflected in the comments of international NGOs, is that the UK has one of the most stringent and robust systems for export control. When other countries are interested in making their regime more stringent and robust, they look to the UK.
Stephen Twigg
Are you aware of the Dutch and Swedish systems, which Iain highlighted earlier?
Paul Everitt
Not the specific details of them.
Chair
On that note, thank you very much for coming in front of the Committee and answering all our questions. I am sure that if we need to ask for further information you will be happy to respond.
Paul Everitt
Absolutely. If there is anything more that you need from us, I will be more than happy to respond. Oral evidence: Use of UK-manufacture arms in Yemen, HC 928 4