Defence firms escape added brokering regulation

The Government has decided not to publish a list of arms brokers, after a consultation with defence manufacturers, exporters and other interested bodies gave no clear indication that it would be welcome or useful.

The idea of a pre-register of arms brokers, to be made public and updated regularly, was raised last year and in April 2014, the Export Control Organisation (ECO), part of the Department for Business, Innovation and Skills (BIS), began a six-week consultation around the idea of introducing a pre-licensing register of arms brokers. It also asked other states in the EU whether they had such a register and the rationale behind their approach.

Responses came mainly from businesses, the vast majority of which were small or medium sized businesses. Responses from charities, non-governmental organisations (NGOs) and trade associations made up less than six per cent of the responses.

Those contributing to the consultation broadly came from two viewpoints – businesses mainly advocated maintaining the status quo (namely licensing on a case by case basis only) and identified the disadvantages of a pre-registration system as costing more or laying employees open to attacks by anti-arms trade campaigners.

On the other hand, civil society representatives and non-governmental organisations (NGOs) cited the benefit of a comprehensive registration system, preventing undesirable trade through increasing vetting.

Currently, anyone who wants to trade in military or dual-use goods, either by selling direct or by arranging supply between one country and another via the UK, needs a Trade Control Licence. Brokering can also involve arranging intra-company transfers or drop shipping.

Licences are issued by the ECO, and different types of licence are required for dual-use items (goods which can be put to both commercial and military uses) and for different categories of equipment. Details of the goods, the recipient and end-user, as well as details of the UK end of the operation and the personnel involved, are required.

The register would have added another layer of regulation to the system, but BIS has decided that the consultation did not reach any consensus or put forward sufficiently powerful arguments in favour of increasing regulation.

A statement from BIS said: “The Government considers that the UK’s existing trade control legislation, which ensures that all applications are assessed on a case-by-case basis, is sufficiently robust in this area.

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

David Ashcroft, consultant with Harrison Clark Rickerbys, said: “The legal legitimacy of this activity is not in question.  However, it is not beyond attack from those who would seek a change in the law and who are prepared to break the law in pursuit of that objective. For that reason, if for no other, the need for such legislation should be conclusively proved and achieve industry-wide consensus.  Without this, information that could be used to identify the names and addresses of individuals (and therefore their families) should not become a matter of public record.

“While there will always be calls for greater regulation, especially when any breach of existing controls is exposed, the many small businesses which make up a large part of the defence community will be glad to avoid an increase in the regulatory burden.

“Trade controls in the defence industry are very complex – so much depends on the exact nature of goods and transactions, as well as on the countries and individuals involved. Trading in other countries adds to the range of controls and regulations which need to be taken on board by any firm – we can advise on the complexities involved with the UK’s own system and those of other countries.”

For advice on your specific exporting needs, David can be contacted at dashcroft@hcrlaw.com

Author
David Ashcroft
Senior Legal Counsel (Solicitor)
Direct Dial: +44 (0)1432 349 670
Mobile: 07926 090 484
Email: DAshcroft@HCRlaw.com