Return to an Address of the Honourable the House of Commons
dated 18 July 1996 for the Appendices to the Report of the Inquiry into the Export of Defence Equipment and Dual-Use Goods to Iraq and Related Prosecutions laid before The House on 15 February 1996*

Volume One
Section D Arms and Defence-Related Exports to Iraq
Chapter 1 The Howe Guidelines

Excerpt:
THE DISCUSSIONS LEADING UP TO THE HOWE GUIDELINES

D1.17 In January 1984, Mr Richard Luce (as he then was) expressed concern about the export of dual-use equipment to Iran and Iraq. In a minute dated 30 January 1984 reference was made to instances where equipment exported for civilian use had been diverted to military use. FCO officials and DTI officials agreed that ELAs relating to a number of specified categories of dual- use goods would be referred to the FCO in order to tighten up licensing procedures. *8 Difficulties continued to be presented by the IMS contracts. By February 1984, however, it had been agreed by a Cabinet Committee that the release to Iran of the two Yarrow supply ships and of the Kharg could take place but approval for the release of the tank spares was withheld. It was decided that “negotiations should be protracted in order to achieve a more defensible position related to American and Arab opinion.” *9

D1.18 A letter dated 27 February 1984 from Mr Sandars, a senior official in MOD, to Mr Haskell (FCO/MED) cast some doubt on the Government’s success in achieving the even- handed approach that was espoused. He said that “... information on defence equipment supplied to Iran is particularly sensitive since, if the committee [the House of Commons Defence Committee] were to call for comparable information on Iraq, it would quickly become apparent that we had leaned heavily towards Iraq in the early years of the war, despite our declared policy of neutrality.” *10

D1.19 It was about this time in 1984 that public knowledge about the use by the Iraqis of chemical weapons began to be widespread. A United Nations report published on 26 March 1984 confirmed that mustard gas and the nerve gas, Tabun, had been used by the Iraqis and, as a result, an EG(C)O was issued in July bringing under export licence control a range of chemicals which could be used in the manufacture of CW agents. On 1 March 1984 in answer to a PQ put to the Secretary of State for Defence by Mr Dennis Skinner MP, Mr Geoffrey Pattie MP who had become the Minister for Defence Procurement (Min.DP), said that “Export licences will not be granted for licensable equipment which could be used in the manufacture or assembly of chemical weapons in cases where it is thought that the equipment is intended for such use”, *11 and on 15 March 1984, in answer to a PQ from Mr Tony Banks MP, Mr Pattie confirmed “that we do not intend to authorise the supply of any item which might assist Iran or Iraq to wage chemical warfare during the current conflict.” *12

D1.20 On 2 March 1984 Mr Alan Collins put up a submission to senior FCO officials and to Mr Luce on the problems regarding the supply of defence equipment to Iran and Iraq. *13 He recommended a more rigorous approach to sales to both countries and on 6 March 1984 reference was made in a Note to Mr Luce to “.... the inconsistency between supplying spares for Iraqi tanks and refusing spares for Iranian tanks, and the difficulty we would have in reconciling this with a policy of neutrality and even- handedness”. The Note continued “the PUS has noted that there is no principle here, just expediency.” *14

D1.21 In these circumstances, Mr Luce in April 1984 asked senior officials to conduct a review of policy on the sale of defence equipment to Iran and Iraq to see whether there might be merit in a change.

D1.22 In an important submission dated 13 April 1984 Mr Haskell, responding to Mr Luce’s request for a review of policy, recommended that present policy be continued. He summarised the “present policy” in this way:

“Our present policy is that we are neutral in the conflict between Iran and Iraq and do not sell lethal equipment to either side. However, we continue to trade normally with both countries and have sold non-lethal military spares and equipment to both ... We have so far refused to be drawn into detailed discussions of what constitutes “lethal” and “non-lethal”, so as to retain some flexibility to adjust our supply of equipment and parts to the ebb and flow of the conflict.” *15

D1.23 I would draw attention to the reference to the retention of “flexibility”. The flexibility in question was apparently desirable in order to enable items, presumably those on the boundary between lethal and non-lethal, to be described either as lethal in order to justify a refusal to permit export or as non-lethal in order to justify a decision to allow export, depending on the state of the war for the time being. This use of “flexibility”, in order to permit an apparently objective guideline to change its meaning according to the exigencies of the moment, will ring a bell of recognition for those who have attempted to follow the manner in which the Howe Guidelines were interpreted and applied. I will return to this point later.

D1.24 Mr Haskell set out both the arguments against the supply of any defence equipment to the combatants and the arguments in favour. Of the arguments against, the first mentioned was the difficulty “in justifying our position, both to public and Parliamentary opinion in Britain, and to our Arab friends and the United States, who have criticised our policy, and called in one way or another for a ban on military equipment or other sales to Iran”; another was the widespread repugnance towards Iraq over its use of chemical weapons and towards Iran over its use of children in its forces and “some feeling that it is ‘morally wrong’ to supply defence equipment of any kind to either”. The arguments in favour were mainly the important economic ones, bearing in mind that if defence sales to Iraq and Iran were to be cut, there might be “adverse reaction on our general trade from Iraq and Iran as a result” and “on last year’s figures a loss of up to £1,000 million in British exports”. There was reference also to the likelihood of other countries supplying any items that this country declined to supply. Mr Haskell noted that “in Iraq our withdrawal would further strengthen the position of France”. Mr Haskell concluded with this succinct summary of the position:

“our existing policy stems from our neutrality in the conflict. If we bowed to Arab, United States, and other pressure to deny even non-lethal military equipment to Iran, we would have to apply the same policy to Iraq. We therefore run the risk of alienating both the Iranians and the Arabs, with the loss of valuable export markets and damage to our political relations, to the advantage of others who are less principled or under less pressure. Our interests are therefore best served, on grounds of both political and commercial expediency, by maintaining our present policy.” *16

D1.25 Mr Luce agreed with Mr Haskell’s submission while remaining uneasy about future policy towards the sale of defence equipment to the two countries. *17 It is apparent from the FCO papers that during the summer and autumn of 1984 Mr Luce was attracted by a solution to the problems that would consist of banning the sale of all defence equipment to both Iran and Iraq. *18 Official reaction was not, however, encouraging. *19 An article in the Sunday Times edition of 14 October 1984 critical of British supplies to Iran led to a meeting between Mr Luce and FCO officials on 17 October. The Minute of the discussions on that occasion is interesting. *20 An embargo on all defence-related sales was discussed but agreed to be unrealistic. The problem, it was said in paragraph 2 of the Minute, “lay not with new business (which we could discourage) but with the fulfilment of existing contracts to Iran ... We could not unilaterally break the contracts without becoming liable for large sums in damages. Future civilian contracts with Iran would also be put at risk”. Paragraph 3 of the Minute set out “more modest objectives”. These objectives included that “nothing would be sold which would appreciably increase the capacity for either side to continue the war, or to launch new offensive action”. The formulation of this objective is close enough to that of paragraph (iii) of the Howe Guidelines to justify a finding of ancestry. In paragraph 4 of the 17 October 1984 Minute disenchantment with the lethal/non-lethal distinction was expressed. The Minute recorded that “the precise meaning of these terms was not widely understood. We should also aim to beef up the line for use with the press and Parliament to be as robust and positive as possible. Ways should be found for making it known in the press that deliveries of arms to Iraq had greatly exceeded those to Iran.” It may be noticed that “arms” was there used in its wide sense.

D1.26 The desire to “beef up” the line for use with the Press and Parliament was justified. On 11 June 1984 Mr David Howell MP asked in a PQ to the Secretary of State for Trade and Industry “what equipment that could have military application is currently being exported from the United Kingdom to Iran and Iraq; and if he will take steps to halt any current supplies of, or orders for such equipment.” Mr Paul Channon, the Minister for Trade (MFT) at the DTI replied in these terms:

“Applications for licences covering the export to these countries of goods controlled under the EG(C) Order are carefully scrutinised to ensure that, in accordance with HM Government’s policy of neutrality in the Iran and Iraq conflict, no lethal equipment is supplied. It has been the practice of successive Governments not to make public details of export licence applications.” *21

D1.27 This answer did not provide the information Mr Howell had sought. The formula whereby “practice of successive Governments” was relied on as a justification for not supplying information sought by a PQ was used on many occasions over the period examined by the Inquiry in answer to PQs on defence exports to Iraq and Iran.

D1.28 Use of this formula was based upon Parliamentary practice. According to Erskine May, PQs are not in order if they “fall within a class of question which a Minister has refused to answer” and “among the subjects on which successive administrations have refused to answer questions upon grounds of public policy” are included “details of arms sales to particular countries.” *22 It is stated also in Erskine May that “a fuller list on which there has been consistent ministerial refusal to answer” is to be found in Appendix 9 to the Report of the Select Committee on Parliamentary Questions printed on 17 July 1972. *23 Appendix 9 is a memorandum that was supplied to the Select Committee by the then Principal Clerk of the Table Office. It listed “Matters about which successive Administrations have refused to answer Questions.” The listed matters included, (under the heading “Defence”) “Details of Arms Sales”, (under the heading “Foreign and Commonwealth”) “Supply of Arms” and (under the heading “Trade and Industry”) “Details of export licences.” *24

D1.29 Mr Channon’s answer incorporating the sentence, “it has been the practice of successive Governments not to make public details of export licence applications”, was, therefore, an answer whose terms accorded with current Parliamentary practice. It does not, however, seem to me that the answer was a justifiable response to Mr Howell’s PQ. Mr Howell’s PQ sought information disclosing what defence-related equipment was being exported from the United Kingdom to Iraq. It could have been answered by simply disclosing the broad categories of military equipment being exported, e.g. communications equipment, radar, spares for armoured personnel vehicles, etc. To have given information of this sort would not have involved giving “details of export licence applications”. Nor would it have involved giving “details of arms sales” unless that phrase is to be treated as meaning “any information about arms sales”. The established Parliamentary practice whereby Ministers decline to provide “details of arms sales” is usually justified by reference to the commercial confidentiality of the information being sought. *25 This justification is easy enough to accept in relation to confidential details such as prices, delivery dates, technical specifications, performance data and the like, but, if extended to cover a failure or a refusal to give any information at all about arms sales or about exports to a particular country becomes, in my opinion, spurious. Such an extension goes beyond the reasonable requirements of commercial confidentiality and beyond what would be necessary for compliance with the limitations described in Erskine May and in the 1972 Appendix 9 (assuming, which I doubt, that the Appendix is still a reliable guide to current practice). In my opinion, Mr Channon’s failure to supply, in broad terms at least, the information requested by Mr Howell cannot be justified either by the requirements of commercial confidentiality or by reference to the Parliamentary practice for which Erskine May stands as authority. *26 The same is, in my opinion, true of Mr Channon’s reliance on the same formula in answer to a PQ put by Mr Kirkwood MP on 25 April 1984 asking “how many export licences were granted between 1979 and 1984 for the export of chemical warfare defensive equipment to both Iraq and Iran.” *27 Why should not the number of export licences have been disclosed to Parliament? *28 It is fair to record, however, that Mr Channon’s answers on the two occasions referred to would have been cleared with the FCO and the MOD. .

D1.30 The line for Parliament and the Press certainly did have a need to be beefed up.

D1.31 On 24 October 1984 Mr Collins put up a submission to senior FCO officials and to Mr Luce on particular problems that had arisen regarding two items of business among those left over from the pre-revolution Iranian contracts; one was the supply of two Rolls-Royce Marine Engines for which two year export licences had been granted in 1982, and the other was the refurbishment of two hovercraft currently underway at Cowes. The refurbishment of the hovercraft was thought to come within the so-called “repair waiver” so that export licences were not needed. Mr Collins recommended that, notwithstanding objections from Washington, the contracts should be permitted to be fulfilled. Mr Haskell, in agreeing with Mr Collins’ recommendation, said that “... in both cases we have made, or are prepared to make, the same equipment and services available to Iraq and to Iran. The Americans (and the Arabs) may wish that we were tilting more to Iraq. But we have consistently and publicly emphasised our even- handedness and impartiality in this conflict, and I think it would be inadvisable and morally wrong to be tempted down the primrose path of short-term expediency”. Mr Stephen Egerton, as he then was, also agreed but took issue with Mr Haskell’s reference to “morality” and commented that “... it is better to steer clear of this ... concept now that we are so far into the arms supply game ....” Here, too, “arms” was used in its wide sense. In his oral evidence to the Inquiry, however, Sir Stephen Egerton, as he had become, said that he accepted Mr Haskell’s argument and agreed that morality had a part to play in decisions regarding the supply of weapons, particularly those of a chemical or nuclear type. *29

D1.32 Mr Luce responded to Mr Collins’ submission by repeating his belief in the need for an overall re-examination of policy on arms sales.

D1.33 On 22 October 1984 Mr Collins wrote to Mr Christopher Sandars, head of Defence Secretariat 13 (which later became DESS) at the MOD. *30 He enclosed copies of the FCO papers regarding the review of policy that Mr Luce had instigated and suggested “a meeting at short notice to discuss the issues raised”. Mr Sandars replied with a letter dated 26 October 1984 welcoming the suggestion of a meeting. The letter *31 said that “In formulating a more coherent policy on defence supplies to Iraq and Iran... the following factors need to be taken into account...” The factors were these.

(i) “the need to bring the war to an early conclusion without humiliation to either side.”

As to this, Mr Sandars commented:

“US policy seems to be predicated on the assumption that it is only Iranian intransigence that is preventing an early end to the war. Do we support this analysis? Will the curtailment of minimal military supplies to Iran by the UK do anything to achieve a settlement? Can we be sure that Iraq will be prepared to settle if supplies to Iran are curtailed?”

(ii) “the need to safeguard British and other neutral shipping in the Gulf and avoid the interruption of Western oil supplies”

Mr Sandars commented:

“this would argue against the supply of new orders for naval or air equipment to either side but could possibly permit the supply of defensive equipment, for example to forestall a successful attack on Kharg Island”.

(iii) “the need to settle long standing defence business with Iran on favourable terms and preserve our business there”

Mr Sandars commented:

“it will be necessary to assess the impact which a total cessation of military supplies would have on our civil business in Iran and the forthcoming negotiations on the project 4030 account where the MOD could face claims totalling some £250m”.

(iv) “the need to preserve our commercial and defence trading relations with our major Arab customers”.

The comment was made:

“there is a clear danger of being outflanked by the Americans who will not hesitate in discussions with the Arabs to contrast their strongly anti-Iranian policy with ours”.

(v) “the need to maintain a long term toe-hold in both markets which could be vitally important to us once the war is over”.

(vi) “the need to take into account the strategic significance of Iran in the longer term....”

Mr Sandars continued:

“These factors - and there may also be others to be taken into account - clearly point in different directions and we shall need to consider the relative priority to be attached to each....”

An interesting feature of the factors listed by Mr Sandars is the predominance of concern about Iran. It was military supplies to Iran and how these could be presented to the public, domestic and abroad, that posed the major difficulty.

D1.34 Mr Collins put up a further submission dated 29 October 1984. *32 He recommended that Whitehall endorsement should be sought “for the principle of putting our policy on record by announcing that our guidelines for release of defence equipment to Iran and Iraq are ....” There then followed five guidelines, of which four were the pre-cursors of the Howe Guidelines and the fifth, in the event rejected, was that “we shall undertake no new supply commitments to either party”.

D1.35 The content of Mr Collins’ submission of 29 October 1984 is highly important and valuable in its exposition of the background to the then current policy. Paragraph 4 of the submission makes clear that while in general the supply of lethal items to either side had been prevented, a very considerable quantity of non-lethal defence equipment had been supplied to Iraq. Mr Collins estimated that some £9 million of licensable goods had been supplied to Iran but that 20 or 30 times that figure had been supplied to Iraq. These figures, and the content of paragraphs 4 and 5 of the submission, make it difficult to accept the proposition, frequently stated publicly, that Government had been or was being even-handed in its defence sales policy towards the two countries. Mr Sandars pointed out, in his evidence to the Inquiry, the difficulty of maintaining a policy of impartiality between Iran and Iraq. He explained that “...there were two layers to the policy discussion. There was impartiality in the war and not wishing to side with either one of the combatants, but there was an asymmetrical political relationship between the two countries because of other factors which related to Iran.... So our policy of impartiality, to some extent, was overlaid at certain times during this period by an even more severe posture towards Iran.” *33

D1.36 In paragraph 6 of his submission, Mr Collins commented that “there is no pressure over the supply of equipment to Iraq. Pressure over Iran has, however, grown as a result of a tilt of US policy towards Iraq and Arab and American pressure to cut off all supplies of defence equipment in order to force Iran to negotiate”. In paragraph 8 Mr Collins noted the advantages of the proposed new policy as being “(a) ... a more robust and easily defensible line to take internationally and in Parliament (b) The Americans and Arabs should be pleased .... (though disappointed that the limitations would apply equally to sales to Iraq)”, and the disadvantages as including possible Iranian retaliation against the United Kingdom’s general trade interests, the loss of future defence sales business in both countries, and continuing difficulties over the definition of the military equipment to be covered by the Guidelines. He noted that “to overcome these difficulties, which are at present uppermost in MOD and DTI eyes, we should need a measure of flexibility in interpreting our policy. We would have to avoid being forced into exact definitions of what we were prepared to supply to either side. The well established principle of refusal to reveal the details of individual transactions would be helpful in this respect.” Broad support for Mr Collins’ recommendations was expressed in manuscript notes by Mr Haskell and Mr Egerton. Both envisaged that the proposed new guidelines would have to be discussed at Ministerial level and that Ministers at the MOD and DTI might need some persuading.

D1.37 Mr Collins’ submission is particularly important in its identification of the reasons why new guidelines were required, namely, that the twin pillars of impartiality and the lethal/non- lethal distinction did not enable a coherent explanation to be given either of the Government’s decisions on the release of equipment to the Iranians pursuant to the pre-revolution contracts or of the basis on which defence-related equipment was being licensed for export to Iraq. It is important also to note the reference to the need for “flexibility in interpreting our policy.” As with the reference to flexibility in Mr Haskell’s Note of 13 April 1984, so, too, in Mr Collins’ submission of 29 October 1984, the advantage of flexibility would be to enable decisions taken for policy reasons extraneous to the proposed guidelines to be justified by reference to the proposed guidelines. The later use of “flexibility” in connection with the Howe Guidelines and the justification of that use given to the Inquiry by officials and Ministers was entirely consistent with the use recommended in these earlier submissions.

D1.38 As to his understanding of the concept of “flexibility”, Mr Collins told the Inquiry that he believed that:

“We should not expect the Guidelines to solve easily every problem that came up particularly in the face of rapid changes in the nature of the conflict, the differing interests of the many parties to it and the complex issues involved ...”

But he added that the Guidelines were the starting-point and the benchmark for future decisions on supply, to be upheld until and unless the policy were changed by Ministers. Thus, for example, his view was that, if an industrial case for supply was considered sufficiently important to override an assessment that supply would be a significant enhancement, Ministers would have had to authorise the export. *34 Sir Stephen Egerton, too, believed that flexibility of interpretation did not allow industrial or commercial grounds to override a military assessment of significant enhancement, unless Ministers collectively decided to make an exception or to revise the Guidelines.*35

D1.39 On 2 November 1984 Mr Luce wrote to Mr Butler, who had become Minister DP at the MOD, suggesting new guidelines. A copy of the letter was sent to Mr Channon at the DTI. The proposed new guidelines were set out in the letter. These followed the new guidelines that had been suggested in Mr Collins’ submission, save that Mr Collins’ proposed guideline (v) barring any new supply commitments to either side was omitted. In Mr Luce’s letter the proposed guideline (iii) was that “we shall permit no new supply commitments to either party which would appreciably increase its ability to prolong or to exacerbate the conflict”. This, with the substitution of “significantly” for “appreciably”, led to paragraph (iii) of the Howe Guidelines. Mr Luce’s proposed guideline (iv) was that “in line with this policy we shall continue to scrutinise rigorously all applications for export licences, accepting that this may lead to the relinquishment of our role as a supplier even of non-lethal equipment to Iran and Iraq as long as the present conflict continues”. This, with the omission of the words from “accepting that ...” to the end, led to paragraph (iv) of the Howe Guidelines. The inclusion of this eventually omitted phrase was consistent with the concerns that had been expressed within the FCO, and by Mr Luce in particular, regarding the non-lethal defence equipment that had been and was being licensed for export to Iraq. The eventual omission of the phrase is significant.

D1.40 The proposed new policy was the subject of a submission dated 5 November 1984 (wrongly dated 1985) *36 by Mr Haskell to Mr Ewen Fergusson (as he then was) Deputy Under Secretary of State at the FCO. The submission provides an interesting survey of the comparable policies of other major arms exporters and, in particular, an analysis of the imbalance in the volume of defence sales to Iraq when compared to those to Iran. Mr Haskell, after noting that relatively small quantities (in value) of defence sales had been made to Iraq in 1983 and 1984 (although the 1983 figures were still well over ten times greater for Iraq than for Iran) commented that “.... this more restrictive policy, which has inevitably borne more heavily on Iraq than Iran, had been adopted primarily because of public and Parliamentary criticism of our sales of arms. Though we may represent it as a positive move towards helping to bring the conflict to an end, the bitter truth is that even the more restricted guidelines which we are now proposing to adopt ... will not have any appreciable effect on the military balance whatsoever.” *37 These sentiments were echoed by more than one of the Government witnesses who gave evidence to the Inquiry.

D1.41 It is convenient at this point to refer to the discussion that took place within the MOD and the DTI regarding Mr Luce’s proposed new guidelines.

D1.42 In advance of Mr Luce’s letter to Mr Butler, Mr Collins had written on 22 October 1984 to Mr Sandars informing him of the proposals and asking for his comments. A copy of this letter was sent to Mr Watson of the DTI’s Overseas Trade Division (OT/5). Mr Sandars discussed the proposals with Mr E. Pendlebury, (AUS(Sales Admin)), the Assistant Under Secretary to whom he was answerable, and in a Note dated 25 October, to MOD colleagues recorded that “It was agreed that whilst we had long felt the need for a more coherent set of guidelines against which to consider defence sales to the two combatants, we would not wish to go as far as the FCO suggest in calling a halt to any significant new supplies to either party.” *38 Mr Sandars responded to Mr Collins by a letter dated 26 October 1984 which, while being broadly supportive of the proposed guidelines, argued against the cessation of all new defence supplies. *39

D1.43 The DTI’s reaction to the proposed new guidelines was unfavourable from the start.

D1.44 A Note dated 28 October 1984 from Mr Petter, head of OT/5, to Mr Titchener (OT/5) said that “the more restrictive criteria ... could lead to repercussions on civil exports to both markets” and that Mr Luce’s proposals constituted “a unilateral UK tightening up without regard to the policies and practices of our main competitors, some of whom could be expected to take advantage of opportunities passed up by the UK”. He commented: “to say that the more restrictive approach would apply mainly to Iran would be disingenuous; to say that it would apply equally to both sides would annoy the Iraqis, bearing in mind what the UK has hitherto been prepared to sell them in the way of defence goods.” *40

D1.45 Mr Titchener responded by a Note to Mr Petter dated 31 October 1984. He described the FCO proposals as “an unwelcome development” that “could have repercussions for our civil exports” and could “prevent the sale of dual purpose equipment.” *41

D1.46 Mr Petter made a formal response to the FCO by a letter dated 2 November 1984 to Mr Haskell. He supported the remarks made by Mr Sandars in his letter of 26 October and protested about the adverse effect that more restrictive guidelines would have on civil exports to Iran and Iraq. He said also, presciently, that “there could be interminable argument, particularly about dual purpose equipment”. *42

D1.47 On 7 November 1984 Mr Petter put up a submission on the FCO proposals to Mr Channon. *43 In paragraph 3 of the submission, Mr Petter said that “it seems fairly clear ... that the new policy would be intended to bring about a significant reduction in supplies of non-lethal equipment to both sides”. He pointed out that since supplies to Iraq of non-lethal equipment were much greater than those to Iran, the new policy “would in practice bear more harshly on Iraq than on Iran”. This last point had been made previously by others. It is an odd point to make, bearing in mind that protestations of impartiality between the combatants were the constant and continuing basis of the Government’s public expression of its policy. Mr Petter warned the Minister (in paragraph 4) that “Both Iran and Iraq have indicated to us that our access to their markets is in some degree dependent on our willingness to supply defence equipment” and that in consequence the proposed new guidelines might affect civil exports to both countries. In paragraph 6 Mr Petter summed up the departmental opinion thus:

“We accept that existing policy is difficult to present convincingly but it has enabled British firms to secure valuable defence orders and to continue to pursue profitable civil business in both markets. Its practical advantages, whatever its presentational shortcomings, are therefore not to be lightly discarded”.

D1.48 On 7 November 1984, Mr Luce, Mr Butler and Mr Channon, met and discussed, amongst other things, the proposed new guidelines. Mr Butler had with him at that meeting a draft response, prepared by Mr Sandars, to Mr Luce’s letter of 2 November. The draft response contained revisions to Mr Luce’s proposed guidelines. In particular, Mr Sandars proposed substituting “significantly enhance the capability...” for “appreciably increase its ability...” in Mr Luce’s guideline (iii).

D1.49 At this meeting the need for new guidelines was discussed. Agreement in principle was reached that new guidelines should be based upon the revised form contained in the draft that Mr Butler had with him at the meeting. But since this draft had been prepared without the advantage of comments from other MOD desks and, in particular, without any opportunity for Defence Staff to have expressed their views, Mr Butler reserved his position so that the process of consultation within the MOD could be completed before he gave a formal MOD response to Mr Luce’s letter of 2 November.

D1.50 Mr Pendlebury sought the advice of Defence Staff by a Note dated 8 November 1984 to Air Vice-Marshal Sutton, Assistant Chief of Defence Staff (ACDS(C)). *44 He said, in the Note, that “within the DSO *45 we accept that new guidelines are needed and that ... this might have to be more restrictive than those applied in the past. However, we believe that Mr Luce goes too far in suggesting major policy changes which could lead to a cessation of all new defence supplies to both countries. We also question whether it is necessary in tightening up our present policy, to embark on the extensive background briefing of press, parliamentarians, Arabs and Americans that the FCO envisage.” Mr Pendlebury enclosed with his Note a draft submission to Defence Ministers and a draft response to Mr Luce. The latter incorporated the revisions to the proposed guidelines which had been prepared by Mr Sandars but as further amended by Mr Pendlebury, who had replaced the phrase “would significantly enhance the capability of either side to prolong or exacerbate the conflict” with the phrase “would significantly enhance the offensive capability of either side or the ability to wage war actively or exacerbate the conflict”. Mr Pendlebury informed the Air Vice-Marshal, incorrectly, that the enclosed drafts were those which had been submitted to the Minister DP and had “apparently secured broad agreement” at the Ministers’ meeting on 7 November. Mr Pendlebury’s amendments to Mr Sandars’ draft had not, in fact, been seen by the Minister DP, let alone agreed at the 7 November meeting. Mr Pendlebury has made the point to the Inquiry, which I accept, that this inaccuracy was not deliberate.*46

D1.51 The Air Vice-Marshal’s response, dated 9 November 1984, expressed a preference for omitting any qualifying adverb, whether “significantly” (the Sandars/Pendlebury version) or “appreciably” (the Luce version). *47 He said that “the guidance would then reflect the general defence view that we should do nothing to enhance the capability of either side”. In addition, the Air Vice-Marshal gave strong support to the setting up of administrative machinery “to implement the scrutiny of future applications for export licences to Iran and Iraq”. He suggested “a small committee chaired by DS13 and comprising DS11, DCts (ROW), D14 and Single Services, with an appeal court at two star level”. The “small committee” later became the MODWG. The suggestion for an appeal court was never taken up.

D1.52 The Air Vice-Marshal’s opinion that no sales should be permitted that would enhance the capability of either side may be taken to be the view of Defence Staff. It was a view which was fairly close to the view which Mr Luce had been expressing throughout 1984 although for different reasons. It was not, however, the view which prevailed in the MOD.

D1.53 On 9 November 1984 Mr Sandars wrote a Note for Mr Butler informing him that the process of consultation had “thrown up two slightly divergent views on the exact wording of the key guideline ....” *48 He drew the Minister’s attention to “the following further changes proposed (a) ACDS(C) [i.e. the Air Vice-Marshal] suggests that ‘significant’ should be deleted from line 5 of paragraph 4a; (b) AUS (Sales Admin.) [i.e. Mr Pendlebury] suggests that ‘enhance the capability of either side to prolong’ in line 5 of paragraph 4a might be replaced by ‘enhance the offensive capability of either side or the ability to actively wage war or exacerbate the conflict’.” The text suggested by Mr Pendlebury was the amendment that he (Mr Pendlebury) had made to the Sandars draft before sending it to the Air Vice-Marshal for comment. Mr Sandars, in paragraph 4 of his Note to the Minister, suggested that “these two proposals in effect cancel each other out and if the three Ministers concerned have already agreed the existing form of words, it may be unwise to suggest any amendments at this stage.”

D1.54 This Note did not, in my opinion, adequately bring to the Minister’s attention the view of the operational side of the MOD, the Defence Staff, that no defence equipment should be supplied to either side which might enhance its capability. *49 Mr Sandars, with the concurrence of Mr Pendlebury, seems to have been endeavouring to protect the interests of defence sales not only against the more restrictive proposal put forward by the FCO but also against the more restrictive proposal put forward by Defence Staff in the MOD. It is fair to note, however, that Mr Sandars’ Note of 9 November was copied, inter alia, to Air Vice-Marshal Sutton and that the Air Vice-Marshal made no complaint that his views had been given insufficient weight.

D1.55 By a Note dated 23 November 1984, Mr Pendlebury responded to the suggestions Air Vice-Marshal Sutton had put forward. *50 A copy of this Note was circulated to a number of MOD desks but not to the Minister. In paragraph 2 of the Note Mr Pendlebury said he did not mind whether the chosen qualifying adverb in the guideline was ‘appreciably’ or ‘significantly’ but that he thought one or other was desirable. But his main concern, he said, was that the guideline should emphasise ‘offensive’ capability that might prolong the war. He explained that “it is in my view important that we should do nothing that would so seriously undermine the defensive capability of either side that there was a risk that the war might end not by a peace- settlement but by the collapse of one side or the other ... A literal interpretation of the words suggested by Mr Luce would rule out the provision even of items that maintained the crucial defensive capability of either side.”

D1.56 The logic of Mr Pendlebury’s opinion was that non-lethal defence sales ought to continue to be permitted at least to an extent necessary to maintain the defensive ability of either side to prevent the other from winning the war. Mr Pendlebury has explained that “the true logic of [his] opinion was that the sooner both sides realised they were in a war that neither could win, the sooner peace would come.” *51 The opinion never became MOD policy and does not appear ever to have been put to Defence Ministers. *52 Mr Pendlebury was, however, the Assistant Under Secretary responsible for export sales policy and (inter alia) for DS13 (or DESS as it later became). Part of his duties “was to play a part in formulating DSO views” and to represent those views “when contributing to discussions of policy or practice with other parts of MOD.” *53 He was responsible also for presenting “the final views agreed within MOD in any discussion outside the MOD in which [he] was involved.” His opinion, therefore, was of considerable departmental weight.

D1.57 Mr Pendlebury’s opinion was not far removed from the views expressed by Lord Howe in a statement to the Inquiry dated 14 February 1995. Lord Howe referred (in paragraph 18) to the Government’s policy “to do everything possible to bring the Iran/Iraq conflict to an end - without meanwhile precipitating any significant shift in the relative strength or position of the two combatants” and explained (in paragraph 19) that “if we were to be effective in our attempts (by advocacy or other engagement with policy-makers in the belligerent countries and elsewhere) to bring the conflict to an end, we needed (and tried) to do so on the basis of ‘neutrality’ or ‘even-handedness’ - in the sense of hoping to see the conflict concluded without victory for either side. Certainly that had to be seen as our position.”

D1.58 Mr Butler’s formal response to Mr Luce’s letter of 2 November 1984 was by letter dated 14 November. *54 The letter repeated the views expressed by Mr Butler at the meeting on 7 November, rehearsed the MOD arguments against the adoption of a policy that might lead to a virtual cessation of all new orders for defence supplies for Iran and Iraq (the solution that Mr Luce had originally favoured) and outlined the guidelines the MOD had suggested and that had been generally approved at the meeting (i.e. the Sandars draft). The letter said that the new guidelines “could be presented to Parliament as a significant tightening of our previous policy” and that “the change is more than just presentational but the extent of this tightening up will only become apparent from the way we interpret this new definition.”

D1.59 After further correspondence between Mr Butler and his Secretary of State and between officials in the MOD and the FCO, the new guidelines were agreed in a form satisfactory to the two departments, namely:

“(i) we should maintain our consistent refusal to supply any lethal equipment to either side;
(ii) subject to that overriding consideration, we should attempt to fulfil existing contracts and obligations;
(iii) we should not in future sanction new orders for any defence equipment which in our view would significantly enhance the capability of either side to prolong or exacerbate the conflict;
(iv) in line with this policy we should continue to scrutinise rigorously all applications for export licences for the supply of defence equipment to Iran and Iraq.”

D1.60 The DTI’s attitude to these proposed new guidelines was one of dislike but of resigned acceptance. In a Note to senior officials and to the Minister for Trade, Mr Watson said that “Mr Butler’s formulation keeps the door rather more open for some continuing trade with both sides than does Mr Luce’s” *55 and in a Note dated 20 November 1984 to the Minister for Trade, Mr Titchener said that “This Department’s principal objectives are to maintain the best possible opportunities for trade with both countries, both in civil goods and services and ‘acceptable’ defence exports, and to ensure that existing contractual obligations are honoured - so far as is compatible with the war. These objectives would be best served by maintaining the maximum possible flexibility in the guidelines.” *56

D1.61 Two matters ancillary to the proposed new guidelines were also the subject of broad agreement.

D1.62 First, new machinery for the implementation of the guidelines would, it was agreed, need to be set up. In particular, the MOD was envisaged as having a specialised role to play in advising on the effect of exports on the military capability of the recipient country.

D1.63 Second, it had initially been the FCO assumption that the new guidelines, once agreed, would be announced publicly, to Parliament or to the media or to both. *57 In his letter of 2 November 1984, Mr Luce had referred to the need for “careful presentation [of the new policy] in Parliament accompanied by detailed confidential briefing for selected Parliamentarians and trusted representatives of the media ....” And in his oral evidence to the Inquiry, Mr Luce confirmed that he had had in mind that, once agreement on the proposed new guidelines had been reached, a public announcement would be made.

D1.64 A view held in MOD, however, was that the extensive briefing contemplated by Mr Luce would be unwise as it “might lead many of the recipients to expect more drastic changes than we are contemplating and this could in turn cause more problems than it solves.” *58 At the meeting on 7 November, the Ministers agreed an approach of allowing the Guidelines to emerge gradually in response to questions rather than to make a high-profile announcement. *59 H.M. Ambassador to Iraq, Mr J Moberly, as he then was, also advised against a major public announcement. In a telex sent on 8 November 1984 to the FCO he advised that “it would be preferable that public comment should be on a defensive basis rather than trumpeting the new policy guidelines as a radical departure which they are not.”

D1.65 Accordingly, Mr Luce, in a Note *60 dated 13 November 1984 to the Secretary of State, Lord Howe (as he was to become),*61 recommending approval of the new guidelines, said (in paragraph 3) that:

“I do not think it would be appropriate actively to seek an opportunity for a high profile announcement in Parliament: we should rather allow the new guidelines to become public through answers to Parliamentary Questions and enquiries from the information media. We should, however, take the opportunity of giving careful background briefing to selected Members of Parliament and the Press and also to our main friends in the Arab world to ensure that our policy is properly understood and received with sympathy.”

D1.66 It appears from a letter dated 20 November 1984 from Mr Collins to Mr Sandars that Lord Howe accepted and adopted this advice. *62

D1.67 Mr Luce’s Note of 13 November 1984 is interesting also for the light it casts on the purpose of the guidelines from the FCO viewpoint. After referring to some of the difficulties that had arisen regarding defence sales to Iran, and that had been the subject of discussion on 7 November 1984 between himself, Mr Butler and Mr Channon (each of whom had recently been on an official visit to Iraq), Mr Luce said that: “We therefore concentrated on ways of improving the presentation of our policy while keeping changes of substance to a minimum”. After setting out the new guidelines he said that they “... should be more easily defensible than our present policy. It gets us away from the semantic difficulties inherent in the term ‘non-lethal’, while the inclusion of [guideline (i)] ensures that we are not vulnerable to accusations that our policy has changed direction and must therefore have been misconceived”. He did, however, add “at the same time (iii) and (iv) will mean in effect a slightly more restrictive approach to new business.”

D1.68 In his oral evidence to the Inquiry, Sir Richard Luce (as he had become) explained that he envisaged that, under (iii), if equipment did significantly enhance, export of the equipment would be banned. *63 He summarised his view as being that:

“nothing should override those four criteria. I think one is trying to clear in one’s mind precisely what it means. I think my interpretation, and I think my colleagues’ interpretation, should be nothing, should override that, those four criteria and particularly that (iii) which was the new injection of a type of criteria ....”

D1.69 Preparation was made within the FCO for a minute recommending adoption of the proposed new guidelines to be sent by Lord Howe to the Prime Minister, Mrs Margaret Thatcher M.P. (as she then was). A draft of the proposed minute was prepared by Mr Collins and sent to Mr Sandars at the MOD and to DTI officials. *64 A meeting to discuss the draft was arranged for 29 November 1984. It was envisaged that the meeting would discuss also the machinery that would be set up to implement the new guidelines. *65

D1.70 The meeting of 29 November was chaired by Mr Day. Mr Sandars represented the MOD. The DTI was represented by Mr Watson of OT/5 and Mr D Sanders of the Export Licensing Bureau (ELB). The primary matter for discussion was the draft letter to be sent by Lord Howe to the Prime Minister. It was agreed, according to the DTI Note of the meeting, that the draft would “strengthen the argument that policy should not be too restrictive by reference to importance of both markets to the UK”, would come down explicitly against an embargo “and would, given the uncertainties of war, keep whatever flexibility possible in the actual Guidelines.” *66

D1.71 It was agreed also that an interdepartmental committee would be established, that MOD would have “representation by policy secretariat, regional marketing and operational experts”, that ELB would be represented, that DTI would, additionally, be represented by “OT5 and Sponsor Divisions as necessary”, and that FCO would “take the chair and lead”. It is interesting to notice that the DTI record of the meeting records Mr Sandars pointing out “that if FCO take the lead and the decisions are in ‘a sense political’, then FCO also takes the flack and deals with complainants”.

D1.72 The meeting also gave attention to some specific difficulties arising out of applications for approval of exports to Iran and Iraq. I will refer to some of these when tracing the history of the IDC and its deliberations.

D1.73 Finally, it was recorded that the conclusion presented in the draft letter was that of the FCO and not that of all three departments.

D1.74 Mr Collins prepared a Note dated 30 November 1984 for Mr Luce and Mr Day identifying some of the problems in regard to current export licensing procedures and outlining the suggestions for the procedures to accompany the new guidelines. *67 As to new procedures, Mr Collins said that a new committee had been set up under FCO chairmanship and would have its first meeting on 5 December 1984 to:

“(i) identify problem areas that may arise from previously granted licences, clearances and other obligations; (ii) consider all new export licence applications in the context of the new guidelines.”

D1.75 Lord Howe’s minute to the Prime Minister, in the form which had been approved by MOD and DTI officials, was dated 4 December 1984. *68 It set out the proposed new guidelines, explained the background to them and the reasoning that underlay them and sought formal Cabinet approval for their adoption. The Prime Minister’s response, conveyed by her Private Secretary, Mr Charles Powell (as he then was), in a letter dated 12 December 1984 was short and positive, viz. “The Prime Minister is content with what is proposed”. The proposals in Lord Howe’s letter thereby became official government policy.*69 Accordingly, Lord Howe’s letter merits and repays careful attention.

D1.76 In paragraph 1, Lord Howe referred to the “considerable difficulties in conducting our relations with the two sides in the Gulf conflict, and with other Arab States and the Americans; as well as in presenting a sufficiently clear and robust defence of our policy [on sales of defence equipment] to Parliament, the press and the British public.” He said that “Criticism of our reliance on the distinction between ‘lethal’ and ‘non-lethal’... has been increasingly difficult to counter....” This paragraph makes clear that the new Guidelines were designed to meet FCO difficulties. It was not a coincidence that they had been the product of FCO thinking nor that an FCO official chaired the newly created IDC. Mr Luce’s opinion was that the Guidelines were “largely concerned with the presentation of our policy.” *70 Lord Howe, in his oral evidence, agreed that one of the main purposes of the Guidelines was to provide a formula by reference to which Government policy could be publicly expressed and defended. *71

D1.77 In paragraph 2, Lord Howe told the Prime Minister that the three Ministers, Mr Luce, Mr Butler and Mr Channon, had concluded that “the option of cutting off all supplies is not open since it would cause enormous damage to our long term interests in Iran and might lead to pressure for some form of compensation from British industry.” The context of this paragraph makes clear that the current difficulties related to supplies to Iran, not those to Iraq. The paragraph continued “They therefore concentrated on ways of improving the presentation of our policy, without radically altering its substance.” This paragraph confirms the presentational function of the new Guidelines.

D1.78 In paragraph 3, Lord Howe proposed the adoption of “the following set of Guidelines to all deliveries of defence equipment to Iran and Iraq.” The four Guidelines were then set out. Lord Howe’s reference to “defence equipment” in the passage I have cited was clearly intended to include both “lethal equipment” (guideline (i)) and non-lethal equipment (guideline (iii)). But “defence equipment” is not a term of art and the question whether and to what extent Industrial List dual-use goods were intended to be subject to the Guidelines was left open by the minute. The DTI did not regard Industrial List items as constituting “defence equipment”. The view was expressed by Mr Gallaher, who became head of OT4 in the DTI in June 1986, that machine tools were not properly within the scope of the Howe Guidelines. *72 It is probably right that machine tools, even if intended for the manufacture of weapons or ammunition, would not ordinarily have been described as “defence equipment”, but, in relation to many, perhaps most, of the dual-use Industrial List items, the question whether they were or were not “defence equipment” would depend on the use to which they were intended to be put. Communications equipment intended for use by personnel at an oil well would not be “defence equipment”. The same equipment intended for communication between headquarters and troops in the field would clearly be “defence equipment”. In relation to the former, no question of “significant enhancement” could arise. In relation to the latter “significant enhancement” might bar the export. From the DTI point of view, the application of the Guidelines to dual-use items in respect of which an intended military use was no more than a suspicion, and which were, therefore, not established as being “defence equipment” was an application which went beyond the original intendment. In contrast, the MOD operational and security experts, if asked to assess the effect of a proposed export on the military capability of the recipient, would be bound to do so on the hypothesis that the export would be put to a military use. Otherwise the question of enhancement of capability could not arise. And the FCO, for its part, would be more concerned with the political and presentational consequences of the export than with the question whether the exported goods could, strictly, be described as “defence equipment”. One of the inherent problems of the Guidelines was, therefore, that where dual-use items whose intended use was uncertain were concerned, each department in considering the application of the Guidelines would be likely to be doing so from a different standpoint. This ambiguity was inherent in the Guidelines from the outset. *73

D1.79 In paragraph 4, Lord Howe said that guidelines “(iii) and (iv) will mean, in effect, a more restrictive approach to new business although ... not ... a total embargo which would damage our substantial commercial interests”. There was, by way of contrast, a total embargo under guideline (i) in respect of ‘lethal’ equipment. It is important to be clear that there never was a total embargo on defence sales to Iraq. The United Nations did not impose one (until the Iraqi invasion of Kuwait in August 1990). *74 The Government did not impose one (save in respect of lethal weapons and a few special items such as chemical precursors for chemical weapons). The contemplation was always that defence sales of non-lethal equipment would continue albeit on a restricted basis. DESO remained anxious to promote these defence sales and the DTI remained anxious to promote sales of Industrial List goods generally.

D1.80 In referring in paragraph 4 to guidelines (iii) and (iv), Lord Howe added that “the wording of (iii) enables us to retain a modicum of flexibility”. The language of this comment does not seem difficult to understand. Whether a particular export would or would not “significantly enhance” capability would be a question on which officials and administrators would need to take expert advice but nonetheless a question on which opinions might genuinely differ. The “modicum of flexibility” reads like a reference to the options open to government in cases in which the proposed exports fall into a grey area where reasonable opinions on significant enhancement may differ. But in paragraph 5 of the letter, Lord Howe described the guidelines as enabling “a more restrictive but nonetheless flexible policy” to be applied. This reference to flexibility might have been thought to relate to the “modicum of flexibility” mentioned in paragraph 4. But Lord Howe made clear in his oral evidence to the Inquiry that he was referring not simply to the grey area inherent in guideline (iii), or in guideline (i) for that matter, but to the freedom of government to take whatever licensing decisions the circumstances of each case might from time to time seem to require. In his oral evidence he contended strongly for the legitimacy of this wide role for flexibility. His opening thesis was that the Guidelines did not, on their own, constitute government policy on defence sales to Iraq and Iran, but that they constituted guidance to officials as to how they should deal with the individual cases that came before them. The policy, he said, was “one which allowed Ministers to reach conclusions on the strength of their evaluation of competing British [interests].” *75 In another passage he said that the Government’s “overall policy” was one of “strict impartiality towards the Iran and Iraq conflict and in seeking a peaceful end to that conflict.” *76

D1.81 I would readily accept that, in relation to defence sales to Iran and Iraq, the Guidelines were not, and were never intended to be, an exclusive exposition of Government policy. Government spokesmen, both before and after December 1984, often referred to the Government’s policy of impartiality or of even-handedness. The Guidelines themselves did not require impartiality or even-handedness as between Iran and Iraq. Further, it was Government policy that defence sales to Iran and Iraq, as well as to all other countries, should be restricted by the various treaty obligations in force from time to time. While these various aspects of policy (and there were many others) make clear that the Guidelines were never intended to be exclusive of all other considerations and other aspects of policy, they were, as they were consistently represented to be, Government policy. Lord Howe described the Guidelines as “an aspect of the management of the policy..”, *77 a description that Mr William Waldegrave MP, Minister of State at the Foreign Office from 1988 to 1990, supported. *78 The letter of 4 December 1984 did not, Lord Howe said, “establish a ‘new policy’”. *79 In his written comments dated 3 July 1995 Lord Howe categorised the statement that the contents of his letter “became official Government policy” as “simply wrong”.

D1.82 I regard Lord Howe’s attempt to distance the Guidelines from “policy” as really no more than a play on words. Of course it can be said that it was Government policy to reach conclusions on defence sales, as no doubt on all other issues, by an evaluation of competing British interests. But, within that broad aspiration, Government was concerned, for presentational reasons, to have at hand a formula by which to explain the basis on which defence sales of licensable equipment to Iraq and Iran would be, or had been, sanctioned and which officials could have recourse to for the purpose of their decisions or recommendations on proposed defence sales. Instance after instance can be found in the documents in which Government “policy” on defence sales to Iraq and Iran is described by reference to the Howe Guidelines. That was, after all, the intended presentational purpose of them. Lord Howe made the point that Government was not bound by the Guidelines and could in law depart from them at its discretion and as the particular circumstances of individual cases might require. So, too, did Lady Thatcher. *80 The point is correct but does not undermine the policy status of the Guidelines. The Guidelines were conceived as a statement of the policy that would be applied towards defence sales to Iraq and Iran (why else were the DTI and the MOD anxious that they should not be too restrictive?). Mr Michael Heseltine, Secretary of State for Defence, in his response dated 7 December 1984 to Lord Howe’s letter to the Prime Minister, referred to the Guidelines as “the new policy.” *81 The Guidelines were frequently publicly referred to by Government spokesmen as “policy”. Lord Howe himself so referred to them. *82 The Prime Minister, too, so referred to them. *83

D1.83 Lord Howe’s attempt to disqualify the Guidelines from being treated as a statement of policy was, I conclude, prompted by his insistence that flexibility was inherent in Government policy towards defence sales to Iraq and Iran and that that flexibility was not to be treated as limited by guideline (iii). Be that as it may, the Guidelines were, in my opinion, clearly intended as an exposition, albeit not an exclusive exposition, of Government policy towards exports to Iraq or Iran of defence equipment. The undoubted fact that it remained open to Government to depart from that policy in particular cases if it thought fit to do so, does not contradict that proposition. Under the Guidelines it was Government policy that no lethal equipment should be supplied; it was Government policy that defence equipment which would significantly enhance capability etc. should not be supplied. It remained in law open to government to grant licences for the supply of lethal equipment, or for the supply of defence equipment that would have significantly enhanced the capability of the recipient, and particular circumstances in an individual case might, no doubt, have justified a decision to do so. But to have done so, whatever the justification, would have involved a departure from the policy on defence sales adopted by the Government in adopting the Howe Guidelines. At a meeting of the IDC on 10 December 1985, attended by officials from the FCO, the MOD and the DTI, it was agreed that the Guidelines were “the prime source of policy on defence sales to Iran and Iraq.” *84 That was how it appeared to them then and that is how it appears to me now. Mr Collins, who played an important role in the discussions that led to the formulation of the Guidelines and who chaired the IDC until May 1986, said in his written evidence to the Inquiry that “Sir Geoffrey’s letter must be taken as the definitive statement of Government policy” *85. I agree. To pretend that this was not so is futile and unacceptable.

D1.84 In paragraph 7 of the letter to the Prime Minister, Lord Howe referred to the rigorous scrutiny that all licence applications for defence exports to Iraq and Iran would be given, and went on: “An important new part of this consideration will be prior assessment by Defence Operational Staff of the extent to which the supply would significantly enhance the offensive capability of either side, or their ability to wage war actively”. This language is interesting because it is more or less a repeat of the amendment, in the event omitted, that Mr Pendlebury had sought to make to the guideline drafted by Mr Sandars and that eventually became guideline (iii). The provenance of paragraph 7 can be traced from two Notes. In paragraph 3 of the Note dated 20 November 1984 sent by Mr Collins to Mr Sandars Mr Collins said that “... we agree with Mr Butler’s view [expressed in his letter of 14 November] that it would be preferable to avoid introducing the criteria of enhancement of offensive capability into the guidelines. This, however, would be a very important element in determining whether the supply of any item of defence equipment would significantly enhance the capability of either side to prolong or exacerbate the conflict.” *86

D1.85 The second Note is the Note of 23 November 1984 sent by Mr Pendlebury to Air Vice- Marshal Sutton. *87 In paragraph 3 of this Note, Mr Pendlebury said that “it may well be that the Ministerial wording [by which he meant the guideline in the form drafted by Mr Sandars] will emerge as general guidance while the more elaborate wording we have suggested [by which he meant his own amendment to Mr Sandars’ draft] will be accepted as the detailed guidance for use at official level while actual proposals are considered. This is the FCO view at official level”. It is not clear which official or officials at the FCO Mr Pendlebury had in mind. *88 Mr Collins has made clear he had never seen Mr Pendlebury’s Note (which was not copied to the FCO) and that neither he nor, in his view, anyone in the FCO regarded paragraph 7 of Lord Howe’s minute as detracting from the scope of guideline (iii). *89

D1.86 The underlying purpose of Mr Pendlebury’s amendment had been to prevent the new Guidelines being applied so as to undermine the defensive capability of either Iran or Iraq. It might be inferred that the inclusion of similar language in paragraph 7 of Lord Howe’s minute to the Prime Minister would have had the same purpose. Mr Pendlebury represented to Air Vice- Marshal Sutton that this was “the FCO view” at official level. There is no indication in the documents, however, that this underlying purpose had ever been put to or approved by any FCO Minister. Nor had it been put to or approved by MOD Ministers. *90 Paragraph 7 of the minute did, however, produce, in the respect I have been discussing, an ambiguity as to the intended effect of guideline (iii). The actual guideline said one thing; but the criterion to be used in the prior assessment to be carried out by the MOD said another. *91

D1.87 The submission to the Prime Minister dealt, in paragraph 8, with the publicity that would be given to the Guidelines. The paragraph proposed that the Guidelines should be implemented immediately but without any “high profile announcement of the new arrangements in Parliament”. Instead, it was suggested, “we should allow the new guidelines to filter out through answers to Parliamentary Questions and enquiries from the media”. Whether by formal public announcement or by a gradual filtering process, however, any public statement of the Howe Guidelines would be bound, by referring to guideline (iii) in terms without mentioning also the more limited application proposed in paragraph 7, to conceal from the public the ambiguity to which I have referred. Similarly, any public recitation of the Guidelines would be bound to suggest to the listener that applications for export licences for lethal equipment or for equipment that would significantly enhance the capability of the recipient to prolong or exacerbate the war would be refused, and would conceal the wide flexibility, not limited to the grey areas inherent in guideline (iii), for which Lord Howe in his evidence to the Inquiry contended.

D1.88 There seem to have been two main reasons for the decision to avoid “a high profile announcement” of the new Guidelines and instead to allow knowledge of them simply “to filter out”. The first reason was a fear that a formal public announcement might suggest a more fundamental change in the substance of policy on defence sales than was in fact intended. It was accepted that the new Guidelines would usher in a somewhat more restrictive attitude to ELAs for defence sales to Iran and Iraq than had previously been shown, but it was not anticipated that the change would be more than slight. Indeed, I infer from the documents to which I have referred that the DTI and the DESS and DESO desks in the MOD were anxious to do what they could to ensure that the change was no more than slight. As it was put by the Secretary of State for Defence, Mr Michael Heseltine, in a letter dated 7 December 1984 to the Foreign Secretary “...we must beware of giving rise to expectations of more fundamental change than we intend.” *92 The second reason was a strong desire to avoid drawing attention to the continued supply to Iran of equipment contracted to be supplied under the old contracts. The Guidelines were intended to provide a basis on which these supplies to Iran could be publicly defended. But the Government would have preferred not to have to do so. Sir Stephen Egerton, in his oral evidence, said “I think the reason why this became low profile rather than high profile, was that fear of the balance of our restriction i.e. we were going to go on supplying Iran with contracted things pre December 1984 of really considerable seriousness in the war effort... provided they were not lethal... and that would have annoyed the Arab community very, very much and, if there had been a high profile announcement, it would certainly have come out that we intended to fulfil ...those contracts...” *93

D1.89 The reasons for avoiding a “high profile” announcement were essentially FCO reasons and echoed the warnings given by Sir John Moberly, H.M. Ambassador to Iraq, in the telex to which I have already referred. Both Mr Butler *94 and Mr Channon *95 regarded a decision on the degree of publicity to be given to the new Guidelines as being essentially one for the Foreign Secretary to take, save to the extent that the DTI and DESO would need to make exporters aware of the new rules. Within the FCO the question of the extent to which and the manner in which the Guidelines would be publicly announced seems to have been considered almost exclusively by reference to the reactions in foreign capitals. This, perhaps, was a natural corollary of the intended presentational function of the Guidelines.

D1.90 In the event, the Howe Guidelines were not publicly announced until October 1985.

D1.91 The Prime Minister’s positive response to Lord Howe’s letter of 4 December 1984 established the Howe Guidelines as an expression of Government policy on defence sales to Iran and Iraq. But the Departments were not in all respects ad idem as to the intended scope of the Guidelines. Despite the presentational purpose of the Guidelines, there was general agreement by the witnesses to the Inquiry that the Guidelines were intended to introduce a more restrictive approach to export licence applications for Iraq and Iran. The Note of 30 November 1984 which I have already mentioned, referred to Mr Luce’s opinion that the new Guidelines “will mean a more restrictive approach to new business”. Mr Stephen Day, who was head of the MED at the FCO from 10 November 1984 until January 1986, agreed, in his oral evidence to the Inquiry, that he regarded the Howe Guidelines as limiting in practice the freedom of action of Government to decide which exports to license and which to refuse to license. *96 Mr Collins was the desk officer for Iran from December 1983 to May 1986. His understanding was that the Guidelines were a definitive statement of policy “... and that it was to be strictly interpreted. If people did not want to stick to this, then the matter had to go back to Ministers.” *97 Sir Stephen Egerton was Under Secretary of State for the Middle East from October 1982 to January 1986 (after which he was H M Ambassador to Saudi Arabia). He, too, regarded the Howe Guidelines as not simply presentational but as intended also to mark a more restricted approach to new defence sales business than had previously been the case. *98

D1.92 The FCO regarded the control of exports via the export licensing system as one of the tools available to the FCO in conducting Britain’s foreign policy. There was no limit, in the FCO view, to the type of criteria that might, in individual cases, justify, for foreign policy reasons, a refusal to permit particular exports to go to particular countries. The Howe Guidelines identified, under guidelines (i) and (iii), particular criteria which would lead to the refusal of a licence. But, in the FCO perception, these criteria were not exclusive of others that, too, might require a refusal. In an individual case, where neither guideline (i) nor guideline (iii) required a licence to be withheld, other foreign policy factors, such as those set out in the FCO’s general internal guidelines, might require the refusal of the licence. In the absence of any criteria expressed either in the 1939 Act or in any of the EG(C)Os, this perception was, in law, plainly correct. And, in practice, the Howe Guidelines could not have been intended to be exclusive. The point may be tested by reference to Britain’s treaty obligations under the NNPT or under the Australia Group agreement. Exports might well escape the embrace of guidelines (i) and (iii) of the Howe Guidelines while nonetheless falling foul of a treaty obligation. It could not have been supposed that the Howe Guidelines sanctioned the grant of export licences for those exports. The general approach adopted by the FCO, as well as by the DTI and the MOD, was that an export licence should be granted unless there was a sufficient reason for its refusal. The Howe Guidelines prescribed circumstances in which licences for export to Iraq or to Iran would be refused. They did not prescribe circumstances in which licences would be granted.

D1.93 Mr Channon, however, did not accept this approach but, instead, was of the view that if exports to Iraq or to Iran were not barred by the Howe Guidelines, export licences ought to be granted. He said, in his oral evidence, that “at the start the intention was that you had to fall within one side or the other of the guidelines and, if you fell on one side, an export would be allowed, and if you fell the other side, it would not.” *99 The FCO, in objecting to the grant of licences for reasons unconnected with the Guidelines were, in Mr Channon’s view, changing the rules as they went along. Mr Channon’s view on this point was not, in my opinion, for the reasons I have outlined an acceptable one. But, having heard his evidence, I have no doubt that it was one that he genuinely and consistently held. It was, I infer, a view generally held within the DTI.

D1.94 The difference of view between the FCO and the DTI to which I have referred was reflected also in the DTI attitude towards “flexibility” in the application of the Guidelines. Mr Channon, in a letter dated 11 December 1984 to Lord Howe, expressed his general agreement with the Guidelines, referred to the importance of British trade both with Iran and with Iraq and added “Inflexible operation of the guidelines could damage these major interests. I hope, therefore, that you will agree that it will be important that officials where implementing them, should seek to maintain the best possible opportunities for trade with both countries, both in civil goods and services and ‘acceptable’ defence exports.” *100 In his oral evidence Mr Channon made it clear that in calling for flexibility in the application of guideline (iii) he was arguing against a rigorous application that might bar exports. He was recommending an application that would not bar any export unless it could clearly be shown that the export would “significantly enhance”. This approach would constitute, so to speak, one-way flexibility i.e. in grey area cases, licences would be granted, not refused. *101 This DTI view is difficult to reconcile with the sentence in paragraph 7 of Lord Howe’s minute to the Prime Minister: “officials ...will rigorously scrutinise all applications for defence equipment to ensure that they fall within the guidelines”. The use of the word “ensure” implies that in cases of doubt applications would be refused. Mr Channon, however, did not accept that that was the intention. “If that was the intention”, he said, “it was one that certainly escaped us.” *102 His understanding at the time was that if it was not clear that applications were disqualified by the Guidelines, they would be granted. Mr Petter, head of DTI’s Middle East Branch from June 1984 to September 1993, seems to have agreed with Mr Channon’s understanding. In his evidence to the Inquiry he referred to the DTI being unhappy when “exports otherwise allowable [were] prohibited for foreign policy reasons.” *103 In this respect the DTI view was at variance with the FCO view and at variance with the content of Lord Howe’s minute to the Prime Minister.

Endnotes
*8 - FCO/2.3.206

*9 - see Mr Collins’ Note dated 23 February 1984 (FCO/2.3.204)

*10 - see FCO/2.3.202

*11 - see House of Commons Hansard: 1 March 1994 Col 343

*12 - see House of Commons Hansard: 15 March 1994 Col 214

*13 - FCO/2.3.194

*14 - FCO/2.3.193

*15 - FCO/2.3.171

*16 - FCO/2.3.171

*17 - see the Note dated 19 April 1984 from Mr Luce’s Assistant Private Secretary to Mr Haskell (FCO/2.3.170)

*18 - FCO/2.3.159 and FCO/2.3.163

*19 - FCO/2.3.164

*20 - FCO/2.3.139

*21 - see House of Commons Hansard:11 June 1984, Col 332

*22 - Erskine May’s Parliamentary Practice (21st Ed.) p.292

*23 - Ibid. p.292 footnote 7

*24 - see also paragraph D4.35 infra

*25 - see e.g. Mr Needham’s answer to Mr Fatchett’s PQ on 24 November 1994; House of Commons Hansard: Col. 300

*26 - For further discussion on the extent of ministerial obligations to give information in response to PQs, see paragraphs D4.56 to D4.63 infra.

*27 - see House of Commons Hansard: 28 April 1983, Col 512

*28 - Mr Channon, in a letter dated 7 December 1995 to the Inquiry, has made the point, which I accept, that research into Hansard (Vols 44 to 116) has revealed that the two occasions to which I have referred were the only occasions on which he used the ‘established Parliamentary practice not to reveal details’ formula in answer to PQs

*29 - see the transcript of his oral evidence, Day 11, 15 June 1993, pp.28/9

*30 - FCO/2.3.141

*31 - FCO/2.3.89

*32 - FCO/2.3.120

* 33 - see the transcript of his oral evidence, Day 3, 10 May 1993, p.32, see also pp.30-32 and 41-43. The “other factors” to which Mr Sandars referred included the detention by Iran of the US hostages and of British subjects and pressure from the United States for a tough line to be taken against Iran.

*34 - see written statement of Mr Alan Collins dated 28 May 1993: pp. 3-4; see also the transcript of his oral evidence; Day 10; pp. 40-44

*35 - see the transcript of his oral evidence; Day 11; pp. 66-71

*36 - FCO/2.3.91

*37 - Mr Haskell’s submission contains also some interesting comments on the application of the ‘impartiality’ policy:

“You asked why we have supplied 20 times as much equipment to Iraq as to Iran, despite our public attitude of impartiality. The reasons are historical. When this subject was considered by Cabinet in 1981, the Attorney-General said that the legal implications of neutrality required us to be impartial, but the Prime Minister said that we should interpret this as flexibly as possible in the case of Iraq....”

*38 - MOD/4 & 5.16

*39 - FCO/2.3.89

*40 - DTI/27.62

*41 - DTI/27.84

*42 - DTI/27.99

*43 - DTI/27.129

*44 - MOD/4 & 5.53

*45 - The DSO, the Defence Sales Organisation, became later the DESO

*46 - Statement submitted by Mr Pendlebury on 16 February 1995, paragraph 2 \

*47 - MOD/4 & 5.60

*48 - MOD/4 & 5.61

*49 - see the transcript of Sir Adam Butler’s oral evidence, Day 6, 17 May 1993, p.71

*50 - MOD/4 & 5.84

*51 - Mr Pendlebury’s written statement submitted on 16 February 1995, paragraph 4; see also paragraph 5

*52 - The supply of defensive equipment so as to prevent the military collapse of either side would have been consistent with Mr Alan Clark’s evidence during his cross-examination in the Matrix Churchill case. Mr Clark considered that “the interests of the West were best served by Iran and Iraq fighting each other, and the longer the better”, see Court Transcript for 4 November 1992 p.91. There is no suggestion, however, that Mr Pendlebury would have supported this extreme view.

*53 - Mr Pendlebury’s written statement submitted on 16 February 1995, paragraph 3, see also paragraph 3 of his Note dated 8 November 1984 to ACDS(C): (MOD/4 & 5.53) in which he referred to himself as “Within the DSO”.

*54 - MOD/4 & 5.70

*55 - DTI/27.151

*56 - DTI/27.152

*57 - see paragraph 2.3 of Mr Alan Collins’ written statement dated 28 May 1993; transcript of oral evidence 11 June 1993; p. 37

*58 - see paragraph 5 of the draft response prepared by Mr  Sandars (MOD/4 & 5.53), although the words quoted were omitted from Mr Butler’s actual response (MOD/4 & 5.67/9)

*59 - FCO/2.3.70; transcript of Sir Richard Luce’s oral evidence: Day 1, 4 May 1993, p.54

*60 - FCO/2.3.38

*61 - Sir Geoffrey Howe was raised to the Peerage in 1992. In order to avoid confusing shifts in the style in which he is referred to in this Report, I shall, for convenience, hereafter refer to him as Lord Howe.

*62 - MOD/4 & 5.81 paragraph 2

*63 - see transcript of his oral evidence: Day 1: p.64 and p.85

*64 - FCO/2.3.141

*65 - MOD/4 & 5.85

*66 - DTI/39 (A1).1706. The other departments seem not to have kept a record of the meeting

*67 - FCO/2.3.24

*68 - FCO/2.3.14 and DTI/39 (A1).1706

*69 - But see the transcript of the oral evidence given by Lord Howe, Day 54, 12 January 1994, p.39 and also paragraph D1.80 infra

*70 - see the Note dated 30 November 1984 at FCO/2.3.19

*71 - see the transcript of Lord Howe’s oral evidence, Day 54, 12 January 1994, p.53.

*72 - see Mr Gallaher’s written statement dated 29  March 1994 , p.3.

*73 - The ambiguity was enhanced by the indiscriminate use of expressions such as ‘arms’, ‘defence equipment’, and ‘defence-related’ equipment. Machine tools for making weapons might not be ‘defence equipment’, but they would certainly be ‘defence-related’

*74 - Repeated assertions to the contrary have been made by Mr Meacher MP, most recently in an article at p.24 of the New Statesman of 17 June 1994 e.g. “... the UN arms embargo on Iran and Iraq throughout the 1980-88 war ...”. Mr Meacher is mistaken. There was no UN embargo until August 1990

*75 - see the transcript of Lord Howe’s oral evidence, Day 54, 12 January 1994 p. 27-29 and also paragraphs 11 and 12 of Lord Howe’s written statement of 10 January 1994

*76 - Ibid. p.52

*77 - Ibid. p.35

*78 - see paragraph 2 of Mr Waldegrave’s letter to the Inquiry dated 21 June 1994 - FCO/694

*79 - see paragraph 11 of Lord Howe’s statement of 10 January 1994

*80 - see the transcript of Lady Thatcher’s oral evidence, Day 48, 8 December 1993, p.4

*81 - CO/32.PM/2.49, paragraph 1

*82 - see Lord Howe’s letter dated 1 December 1986 to the Prime Minister, especially paragraph 4 where he wrote “...the guidelines also provide a policy which is defensible publicly and to our friends, but still allows wider policy considerations to be taken into account. The policy is formulated in a way which is even-handed towards Iran and Iraq, but the end results in terms of exports allowed are not necessarily identical for each side. This has permitted a useful element of flexibility. The policy accordingly reflects the difficult balance we have to strike between our Arab friends and the West’s interests in Iran...” DTI/36.1003

*83 - see the letter dated 2 December 1986 from the Prime Minister’s Private Secretary to Lord Howe. DTI/36.1007

*84 - FCO/2.4.25

*85 - Mr Collins regarded the Guidelines as “a hurdle the [export] proposals had to surmount”, but made clear that other considerations, nothing to do with the Guidelines, might lead to the refusal of an export licence even though the Guidelines hurdle had been jumped.

*86 - see MOD/4 & 5.81

*87 - see MOD/4 & 5.84

*88 - Mr Pendlebury, understandably after 11 years in retirement, is unable to recall which official or officials at the FCO he had in mind. He has pointed out, however, that the respective views of Lord Howe and Mr Collins referred to paragraph D1.84 supra are consistent with his understanding of the ‘FCO view’: Mr Pendlebury’s written comments submitted on 28 July 1995

*89 - Mr Collins’ written comments dated 9 February 1995

*90 - see the transcript of Sir Adam Butler’s oral evidence Day 6, 17 May 1993, p.71/72

*91 - Mr Sandars’ explanation of paragraph 7 of Lord Howe’s submission may be found in his oral evidence, Day 3, 10 May 1993, pp.107 - 116

*92 - FCO/2.3.10 see also paragraph 2 of Mr Sandars’ Note dated 7 December 1984 at MOD/4 & 5.97A

*93 - see the transcript for Day 11, 15 June 1993, pp.43/44

*94 - see the transcript for Day 6, 17 May 1993, p.57

*95 - see the transcript for Day 7, 19 May 1993, p.62

*96 - see the transcript for Day 1, 4 May 1993, p.161

*97 - see the transcript for Day 10, 11 June 1993, p.45

*98 - see Sir Stephen Egertons’ written statement dated 26 May 1993, pp. 1 and 2

*99 - see the transcript of his oral evidence, Day 7, 19 May 1993, p.88 see also pp.96, 111

*100 - DTI/27.171

*101 - see the transcript of Mr Channon’s oral evidence, Day 7, 19 May 1993 pp.85 - 88

*102 - Ibid. p.89.

*103 - see Mr Petter’s written statement dated 20  January 1994 p.9.

* The Full report is available from The Stationery Office Ltd., PO Box 276, London, SW8 5DT.