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 PROCEDURES INSTITUTED TO IMPLEMENT THE HOWE GUIDELINES

D1.95 Important procedural changes became necessary as a consequence of the adoption of the Howe Guidelines. Export Licence Applications

D1.96 Industrial List export licence applications for Iran and Iraq ought, if the Howe Guidelines were to be comprehensively applied, to have been referred by the DTI to the MOD. Unfortunately this did not happen. Under the pre-1984 practice the ELAs referred to the MOD had been limited to those where the goods for export were licensable under the Military List or where the stated end-use was a military use or where the MOD had expressed some special interest. ELAs relating to Iraq were referred to the FCO but not necessarily to the MOD. The FCO would refer some of these ELAs on to the MOD. The adoption of the Howe Guidelines did not bring about any immediate change in this practice. At the IDC meeting held on 18 December 1984, “it was noted that the vast majority of ELAs to be dealt with by the Committee would be category 1 [i.e. Military List]”, and it was agreed that the ELB “would circulate to both FCO and MOD any category 2 [Nuclear] or 3 [Industrial List] ELAs relating to items which might need consideration under the guidelines.” *104 So, in relation to Industrial List ELAs, DTI officials were left as the judges of whether or not the goods constituted “defence equipment” and were subject to the Guidelines.

D1.97 In a manuscript Note dated 26 January 1987 Mr Gallaher, DTI, described the ELB practice: “ELB do not circulate all applications for the supply of goods to Iran and Iraq. They do circulate those for overtly military equipment and items which they judge to be ‘sensitive’ because of the combination of goods and end-user.” *105 In a Minute dated 27 January 1987 to Mr Beston *106 Mr Diston (ELB) enclosed “a note by Mr Gall setting out the consultation arrangements for AE (Atomic Energy) List and IL [Industrial List] (other than electronics) items”. Mr Gall’s note indicated that all nuclear related applications were being circulated to the Department of Energy, the FCO and the MOD (both DESS and DIS), that Industrial List applications with a military or space related end-use were being circulated to the FCO and the MOD (DESS) but that Industrial List applications not falling into either of these categories were being circulated only to the FCO. *107 As to electronics applications, Mr Diston said in his Minute that “All applications for Iraq are referred for advice to FCO, irrespective of military nature or end-use (because of the possibility of diversion). Where the end-user is military or a Government agency (e.g. procurement or research) which could be directly related to military applications, the application would also be referred to MOD ..... on occasions (and perhaps increasingly) FCO will request that an application referred to them should also go to MOD for comment even though we had not originally thought to consult the latter.” Mr Diston went on in the Minute to complain that both MOD and FCO were becoming “more and more ‘old womanish’ over [ELAs] and increasingly concerned about possible political embarrassment”, but commented that FCO could “rightly argue that only the MOD are in a position to say whether a particular computer could have an unacceptable military application even if it is described as being intended for an acceptable end-use such as a cook-house stock control”. I agree. The same could equally be said of those dual-use goods comprised in Industrial List applications referred only to the FCO. And yet the procedure approved on 18 December 1984 had left the decision as to whether or not to refer an ELA to the MOD to the “amateur resources of the ELB”.

D1.98 Mr Anthony Steadman, director of the ELB from May 1987 to January 1991 (nb the ELB became the ELU in November 1988), said in the course of his oral evidence that it was not until 1989 that all Group 3 ELAs were referred to the MOD and, thus, came before the IDC. Until 1989, he said, some Group 3 ELAs were still referred only to the FCO and, if the FCO had no objection to the grant of licences, licences would be issued by the DTI without any reference to the MOD or to the IDC. *108 The goods thus licensed for export without reference to the MOD or the IDC included, in 1987, machine tools destined for the Nassr Establishment. *109 Mr Ian McDonald, head of DESS from January 1986, said in his written statement dated 6 July 1994 that he had not been aware of the practice referred to by Mr Steadman and that the practice had never been agreed to, and would not have been agreed to, by the MOD. Mr Barrett, who was DESS 2 from June 1987 to September 1990 and chaired the MODWG meetings during that period said he, too, was not aware that some of the Industrial List ELAs for Iran and Iraq were not being referred to the MOD. He said also that he was not aware that the system had been changed in 1989. *110

D1.99 Mr Steadman’s reference to 1989 as the time by which all Group 3 ELAs were referred to the MOD receives some support from the Summary Record of the IDC meeting on 18 May 1989. The Summary Record shows that “the IDC agreed that in future all export licence applications would go direct to the MOD and be copied to FCO/MED for information only (some applications were being copied to MED for action. This was time-wasting as they had in any case to be referred to the MOD for consideration by the IDC).” *111 Mr Hextall, however, in his written comments dated 16 February 1995, has described the 18 May 1989 IDC agreement as “nothing more than a procedural measure” designed “to avoid delay in processing [ELAs] through the MODWG and IDC”. This explanation is supported by Mr Barrett’s written comments dated 16 February 1995 and may well be right. It is apparent, however, from DTI ELA records that until November 1987, machine tool ELAs (3M) were not being sent to the MOD. Mr Hextall has referred to “a process of gradual evolution throughout the period from December 1984 to early 1987” during which “the range of goods covered by ELAs referred to the MODWG was gradually extended, largely as a result of concerns which arose within the MODWG about particular types of equipment....” It is clear, in my opinion, that Mr McDonald was wrong in stating that the pre-1988, practice had never been agreed to by the MOD. The Summary Record of the IDC meeting of 18 December 1984 shows that the question of circulation of ELAs to the MOD had been discussed at the meeting and that it had been left to the DTI officials to decide which of the Industrial List ELAs “might need consideration under the Guidelines.” 112 The MOD representatives at the meeting included Mr Sandars, the then head of DS13 (which later became DESS), and Mr Lavender (DS13b) (which later became DESS2). Mr McDonald’s ignorance of the pre-1988 practice suggests that he was not adequately briefed when, in January 1986, he took up his post as head of DESS.

D1.100 Mr Barrett, who took up the post of DESS2 in June 1987, thought that all Iraq and Iran ELAs (other than Group 3F ELAs) were referred by the DTI to MOD. Mr Hextall was in the same MOD post over the whole period. He was present at the IDC meeting of 18 December 1984 and also at the IDC meeting of 18 May 1989. He was aware of the practice regarding ELA circulation that was “noted” at the 1984 meeting and has given evidence that “by early 1987 [he] believed that all ELAs with the exception of those in Group 3F.... were being referred to the MODWG by the DTI.”

D1.101 The pre-1988, practice was not, in my opinion, compatible with the Guidelines, otherwise than on the basis that the goods comprised in the ELAs that were not referred to the MOD were not “defence” or “defence-related” equipment and, accordingly, were not subject to the Guidelines. But Group 3 items were all dual-use, all capable of use for military purposes and capable of enhancing the recipient’s military capability. It was not for DTI officials but for the MOD experts to assess their military significance, if any.

D1.102 It was, in my opinion, unsatisfactory that in the period up to, say, 1988 senior MOD officials, responsible for the MOD’s export licensing procedures and for the efficient discharge by the MOD of its function in ensuring a proper compliance with the Howe Guidelines, should have been unaware that some Group 3 ELAs were not coming to the MOD’s attention. *113

Endnotes
*104 - MOD/8.1.29

*105 - DTI/58.4834

*106 - DTI/58.4835; Mr Diston was responding to a request from Mr Beston for information on “the agreement between Departments at official level.... on the applications which must be circulated” (DTI/58.4832).

*107 - DTI/743

*108 - see the transcript of Mr Steadman’s oral evidence, Day 46, 30 November 1993, pp.37 & 38

*109 - see the Wickman Bennett ELAs, No 3M/1682/87 to 3M/1690/87 (inclusive). DTI/323. With the exception of a few ELAs for temporary licences, machine tool ELAs from about November 1987 seem all to have been referred to the MOD.

*110 - see Mr Barrett’s written statement dated 29 September 1994

*111 - FCO/6.2.42

*112 - MOD/8.1.29

*113 - MOD/28.2.67

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