I move: "That the Bill be now read a Second Time."
It is my pleasure to bring before the House the Control of Exports Bill 2007 for consideration and debate. In a modern global economic environment committed to the principles of trade liberalisation, export controls are an anachronism. As one of the most open economies in the world, with exports of goods and services equal to 86% of gross domestic product, GDP, Ireland has a vested interest in promoting a global trading environment unhampered by bureaucratic obstacles. As a strong supporter of trade liberalisation, Ireland continues to work with its EU partners and other like-minded countries within the World Trade Organisation to eliminate trade barriers and to promote the free movement of trade and services.
Why then does the Government seek to impose controls on the export of certain goods and services? Its adherence to the principle of free trade is tempered by its equally strong commitment to arms control and global disarmament. The global community has a shared need for a stable, secure, inclusive and co-operative international environment. To this end, Ireland and other like-minded countries have undertaken to regulate trade in military products and in goods that have civil and military applications.
The challenge for any administration seeking to introduce an effective export control system is to strike a balance between the two competing policy demands. On one hand the Government has an economic imperative to facilitate trade and ease administrative burdens while on the other, it desires to implement fully its foreign and security policy objectives with regard, for example, to the promotion of non-proliferation and universal human rights.
In striving to reach this balance, the Government's starting point is the external environment. Ireland's existing legislation pertaining to export controls dates from 1983. While a mere 23 years have elapsed, much has changed on the planet. In 1983, Europe and the world languished in the depths of the Cold War. After the fall of the Iron Curtain and the democratisation of central and eastern Europe, one had every reason to anticipate a period of sustained global peace and stability. Sadly however, the tragedy of the attacks on 9 September 2001 and subsequent events have brought the realisation that new threats to international peace and security have emerged. It has become apparent to all that the enemy is no longer confined to massed armies without. Increasingly, one must guard against wanton acts of terrorism within that affect people going about their daily lives. Thanks to the wonders of modern communications, one cannot deny knowledge of atrocities perpetrated on innocent civilians in Darfur and other conflict zones. Last week, Ireland's television screens were filled with haunting images from Burma. Closer to home, the horrors of the recent Balkan conflict, including the massacre at Srebrenica, have dispelled any assumptions that Europe had advanced to a state that made it immune to the inhumanities inflicted on the inhabitants of other continents.
Another challenge to be faced has been the blurring of the distinction between military and civilian goods. States and non-state parties that have been denied the possibility to import weapons directly have sought to develop their own weapons programmes by acquiring items not designed or developed exclusively for military purposes but that nonetheless can have military applications. Twenty years ago, the Government had a clear understanding of what it wished to control, be it guns, bullets, tanks or bombers. However, Ireland has been shaken out of its complacency. Rather than being a missile launched from a B2 bomber, the weapon that struck the Twin Towers was a civilian passenger jet. The London underground explosives in July 2005 were encased in nylon backpacks rather than weapons grade steel. It is now understood that we live in an era when anything and everything can be used as a force for evil. In the right hands a hurley or a cricket bat can be wielded with sublime grace while in the wrong hands, up a dark alley, either can become a lethal weapon.
In the light of these developments and out of concern at whether the existing 1983 legislation was adequate for the needs of a 21st century export control system, in 2003 my Department commissioned Forfás to undertake a review of Ireland's licensing system for military and dual use. The overall objective of this exercise was to prepare a recommendation for the Government as to how best Ireland could modernise and strengthen its export licensing controls so as to ensure full compliance with our international obligations.
Forfás contracted Fitzpatrick Associates, Economic Consultants, in conjunction with the Stockholm International Peace Research Institute, SIPRI, a highly respected authority on issues such as conflict and security, to prepare a report with four specific objectives: first, to consult with Departments, end users, international organisations and specialised institutes, both national and international, involved in the licensing of military and dual-use goods, and with interested parties, to determine the most appropriate export licensing system to be put in place in Ireland; second, to prepare background material for a public consultation process in order to allow members of the public to make submissions or contributions on the optimal method of licensing military and dual-use goods; third, to study international best practice in export licensing control systems in other countries; and, fourth, to submit a report outlining the results of both sets of consultations and the review of international best practice in export licensing systems for military and dual-use goods.
The work of the consultants was guided by an interdepartmental group comprising officials from my Department, the Department of Enterprise, Trade and Employment, the Departments of Foreign Affairs, Defence, and Justice Equality and Law Reform, and the Revenue Commissioners. The group provided assistance and support to the consultants. However, I must emphasise that they had complete editorial independence and the report's conclusions and recommendations were those of the consultants.
As part of this review process, roughly 40 public consultations were held with individual organisations in Ireland. These included exporters, representative bodies, State agencies and others. In addition, some 14 organisations responded to an invitation to members of the public to make submissions.
In the case of industry, the key lessons learned were as follows. Only a small number of companies had any involvement with the licensing system. Those companies who used the system were generally happy with it, while having some suggestions as to how it could be improved. Specific topics identified in this regard included more advance information on developments in the system, greater clarity as to what was controlled and on end users of concern and the need for an electronic application system. Companies in general also emphasised the need to minimise bureaucratic requirements and pointed out the need to balance new restrictions against the possibility of making Ireland an unattractive location for certain highly mobile ICT activities.
As with industry, interest on the non-governmental side was limited to a small number of NGOs. In general, they were critical of what they perceived to be a lack of transparency in the decision-making process and outcomes in terms of detailed information on actual exports. They also criticised gaps in the system on such issues as brokering, licensed production overseas and service exports, as well as the absence of end-use monitoring and checking.
As part of the benchmarking exercise, a review of literature and information on export licensing systems in a range of countries was studied. A more detailed examination was conducted on the licensing systems in place in the United Kingdom, Austria, Sweden and the United States. It emerged that many of the problems that were challenging to Ireland were also a cause for concern in other countries. These included controlling exports of intangible technology, putting into practice the EU's catch-all clause which controls non-listed items if they could be used in a weapons of mass destruction programme, enforcement of licence controls on non-compliant companies and promoting greater co-operation between licensing and customs authorities.
The final report of the Forfás review was published in May 2004. A key finding was that there was no "one size fits all" solution for implementing export controls, rather it is vital to factor in unique national circumstances such as the legal systems and size and scope of the production activities affected when designing an effective system.
The report identified a number of strengths and weaknesses of the Irish system. On the plus side, we have a relatively accessible straightforward system staffed by knowledgeable personnel and the turnaround time for licensing applications stands up well to international comparison. Against that, however, the review recommended action to address a number of weaknesses, in particular the need for new legislation to address the needs of a modern complex export control system.
While the Control of Exports Bill provides the foundation for such a system, my Department has also acted on other non-legislative recommendations of the Forfás review. In line with the review, responsibility for the export licensing function has remained with the Department of Enterprise, Trade and Employment. However, much has been done to improve co-ordination with the other Departments and State agencies, in particular the Department of Foreign Affairs, which is consulted on all licence applications with foreign policy considerations, and the customs authorities of the Revenue Commissioners. The interdepartmental group established to oversee production of the report has remained in existence with a brief to promote and monitor implementation of all the review's recommendations. As this process nears completion, it is my intention to transform this group into a standing interdepartmental committee which will take forward responsibility for co-ordinating the work of the Departments and agencies in the area of export control. A priority of the interdepartmental group is the establishment of a technical advisory panel to act as a specialist resource for my Department on technical questions related to the licensing process.
Acting on the recommendation of the Forfás review, a project to develop an on-line export licensing system has been under way for the past year and I am pleased to announce that this system, on-line export licence application system, OELAS, will be released to exporters in the next few weeks. We have worked hard to improve the flow of information to the exporting companies and in this regard my Department organised the first ever export control seminar in June 2006 in Farmleigh and launched a users guide and customers charter to export licensing.
I also want to inform the House of recent developments at European level. As the House will be aware, the export of dual-use goods from Ireland and other EU member states is governed by a Council Regulation, EC 1334/2000, adopted under the EU's Common Trade Policy in June 2000. The Commission, working with the member states, has drafted an amended or recast version of the dual-use regulation, which was transmitted to the Council in December 2006 and which is currently under consideration by the member states. I welcome the opportunity offered to Ireland and to our partners to revise and update our dual-use controls in response to the lessons learned from the implementation of the regulation and to enable us to respond collectively to emerging threats. I am confident that the new dual-use regulation will help to cement the EU's position at the forefront of the worldwide efforts to promote the non-proliferation of weapons of mass destruction.
Turning back now to the Control of Exports Bill, in January 2005 the Government approved in principle the drafting of new legislation in line with the recommendations of the Forfás review. As the House will be aware, all Government proposals for primary legislation are now subject to regulatory impact analysis, RIA, to determine whether the new regulation will have the desired effect. RIA helps identify any possible side effects or hidden costs associated with regulation and quantify the likely costs of compliance for individuals or companies. It also helps to clarify the costs of enforcement for the State.
Prior to the general roll-out of RIA across all Departments and offices in June 2005, my Department participated in the pilot phase by offering the proposed Control of Exports Bill as a suitable test case. A RIA was undertaken which looked at three options for regulating export control: first, maintain the status quo, that is, to continue to rely on the 1983 Act; second, introduce new legislation which would update penalties, broaden the definition of exportation to include intangible transfers and introduce audit and inspection powers; and third, introduce new legislation along the line of option two but with added controls on arms brokering and technical assistance.
It was quickly concluded that option three was the only one which would ensure that Ireland's export control system was in line with best international practice and would enable us to meet our international obligations. The absence of any evidence to suggest that Irish-based firms were engaging in brokering or technical assistance activities led us to determine that the economic impact of these new controls would be negligible. Two key steps of a RIA are a public consultation process and an examination of enforcement and compliance issues. We were fortunate that these had been examined in some detail as part of the Forfás review.
Working on the basis of the Forfás review recommendations and the findings of the RIA, the general scheme of the Control of Exports Bill was prepared in my Department and was approved by the Government on 19 July 2007. The text of the Bill was approved by the Government in February this year and passed all Stages in the Seanad by 1 March. Unfortunately, it was not possible to schedule time in this House for the Bill before the general election. However, I am pleased to lay this Bill before the House so early in the new term. It is my sincere hope the Bill will complete all remaining Stages as quickly as possible so that we can get it onto the Statute Book at the earliest opportunity. I look forward to working closely with Deputies to achieve this objective.
I wish to explain the provisions of each section of the Bill. Section 1 sets out the definitions of certain terms. Where possible, we have aligned definitions with those in use in EU legislation. Of most interest here is the definition of exportation, which has now been broadened to allow controls to be imposed on both intangible transfers of technology, for example, transmission of software over the Internet, and for goods in transit. This latter provision will enable Ireland to comply with a recommendation of UN Security Council Resolution 1540.
Section 2 sets out the general procedures for the making of regulations and orders and enables regulations and orders to be made for the purpose of giving effect to EU legislation. The European Communities Act is habitually used by my Department for the making of statutory instruments to give effect to trade sanctions and arms embargoes that are the subject of Council regulations. It has also been used to provide for penalties for breach of Council Regulation 1334/2000, the dual-use regulation.
The disadvantage of relying on the European Communities Act is that, until recently, it only allowed for the creation of summary offences. This concern has now been addressed with the adoption earlier this year of the European Communities Act 2007, which provides for the creation of indictable offences and which enables Ministers to make a statutory instrument under relevant domestic legislation to give effect to a European Act. It is no longer necessary, therefore, to include a specific provision to this effect in the Control of Exports Bill and the Government will introduce an amendment on Committee Stage to delete the relevant part of this section.
Section 3 enables the Minister to make orders or regulations to control brokering activities in accordance with EU Common Position 2003/468/Common Foreign and Security Policy, CFSP, of 23 June 2003. It provides for controls to be imposed on brokering activities undertaken in the State and outside the State if undertaken by an Irish citizen or company. The issue of extra-territoriality was a key consideration when framing this section. A person, normally resident here, could, for example, arrange for an arms transfer while temporarily outside the State of goods that at no point transit through Ireland. In the absence of appropriate legislation, on his or her return to Ireland, no prosecution could follow, notwithstanding that an arms embargo might have been breached or that Irish export control laws might have been evaded.
There are, of course, certain challenges with regard to the enforcement of extra-territorial controls. However, on balance, I considered it preferable to have such controls in place so that if documentary evidence concerning illicit arms brokering does become available, for example, as a result of the sharing of intelligence between law enforcement agencies, then the State has the capacity to mount a successful prosecution.
Section 4 enables the making of orders or regulations to prohibit or to control the export of specified goods and technology. Generally such orders will take the form of a list of goods to be controlled. However, it will also be possible to have, for example, a “catch-all” clause, similar to that contained in the dual-use regulation, where export controls can be imposed on non-listed goods and technology where there is reason to believe they may be used in a weapons of mass destruction programme.
The list of goods to be controlled, and their categorisation and description, derives in the first instance from the relevant international export control regimes in which Ireland participates. The relevant regime for conventional arms and dual-use goods, for example, is the Wassenaar Arrangement founded in 1996 and comprising 40 participating states, including almost all EU member states, together with the United States, Russia and other highly developed countries such as Canada, Australia and Japan. Other regimes include the Nuclear Suppliers Group, the Missile Technology Control Regime and the Australia Group for chemical and biological weapons. Ireland participates actively in all these regimes and this year is chairing the expert group of the Wassenaar Arrangement, which has specific responsibility for reviewing and amending its control lists to take account of new technologies and related developments.
Section 5 provides for orders or regulations to be made to control technical assistance, such as repairs, maintenance, development, manufacture, assembly, testing, training and instruction and consultancy services in accordance with EU Joint Action 401/2000 Common Foreign and Security Policy, CFSP, of 22 June 2000. The joint action commits member states to imposing controls on technical assistance in connection with certain military end uses. Subject to a detailed scrutiny of the implications for exporters and my Department, I am willing to look at the possibility of broadening this control. In this regard I will take account of proposals currently under consideration at EU level, in the context of a revision to the EU dual-use regime, to impose controls on technical assistance with regard to dual-use goods.
Section 6 makes general provisions with regard to the issue or refusal of licences. It will also enable regulations to be made governing licence application procedures. These may include, but are not confined to, the form and manner of a licence application, provision for on-line applications, supporting documentation required, processing times, duration of a licence, revocation of a licence, record keeping requirements and provision for an appeals procedure. The imposition of licence fees is also provided for, although I do not envisage their introduction at present. I am committed to the introduction of published regulations on licensing procedures as a means of increasing transparency in the operation of the licensing system.
Section 7 deals with the appointment of officers authorised to enforce the Act and grants them necessary powers such as the right to enter premises, including vehicles, to inspect goods and technology and to require the production of documents and records. This section also allows for joint inspections with members of the Garda Síochána and Customs and Excise officers.
Section 8 creates summary and indictable offences and significantly increases the financial penalties from a maximum of £12,700 under the 1983 Act to up to €10 million and-or five years imprisonment for breaches of the Act.
Section 9 introduces a provision for an annual report on the operation of the Act to be prepared and to be laid before the Houses of the Oireachtas. This is in line with a key recommendation of the Forfás review and responds to calls for greater transparency in the area of export controls. I welcome the opportunity which will be provided by the publication of the annual report to provide accurate information on the export of military and dual-use goods from Ireland and to counter some of the misapprehensions which result from sensationalist media coverage of this issue.
Section 10 is the standard provision for expenses. Section 11 provides for the repeal of the Control of Exports Act 1983 but confirms the validity of the Control of Exports Order 2005, SI 884 of 2005, which contains the current list of controlled military goods. Section 12 provides for the citation of the Bill when enacted as the Control of Exports Act 2007 and for its entry into force, in all or in part, to be made by ministerial order.
I have outlined the contents of the Control of Exports Bill. I am satisfied that it will be comprehensive legislation which will equip Ireland with the tools required to manage an efficient, effective export control system. Nevertheless, some commentators may take issue with the omission of certain topics which they consider should also have been included and I wish to address some of these concerns.
A number of non-governmental organisations have called for the imposition of controls on what they refer to as "licensed production overseas". This is the practice whereby a company based in one jurisdiction permits a second company located elsewhere to manufacture its products under licence. The issue was considered in the context of the Forfás review and ultimately the consultants concluded that "while provision to govern licensed production abroad is legally feasible, this is not a priority concern in the circumstances of the Irish industrial base".
In deciding not to specifically provide for the inclusion of controls on licensed production overseas, my Department also took into account that controls already apply to the export of goods and technology required for the development, production or use of military equipment and other equipment subject to export controls. Such controls would apply to exports of goods and-or technology for use in connection with overseas production. Furthermore, these controls will be enhanced with the imposition of controls under section 5 of the Bill in accordance with the EU's joint action on technical assistance.
The NGO sector frequently seeks information on actual exports by named companies. Let me be clear that I do not consider it appropriate to provide such data. Information submitted by companies in connection with export licence applications is provided in confidence. It is almost always commercially sensitive and security and international relations issues may arise. I am also concerned that the disclosure of such detailed information could prejudice or impair enforcement of and compliance with applicable Irish and European legislation. I am, however, committed to providing information in the annual report to the Houses of the Oireachtas on the aggregate value of actual exports of goods under licence, sorted by category and country of destination. I am firmly of the opinion this will present a far more accurate picture than reliance on licensed values, which by their nature tend to be considerable over-estimations.
There have also been calls for increased end-use monitoring. Responsibility for this task is a burden shared by my Department and other State agencies, and by the exporting companies themselves. I assure the House that my Department takes very seriously its obligation to ensure strategic goods exported from Ireland do not fall into the wrong hands. The sharing of information on potential end-users of concern is a strong component of preventative action by the EU and the international export control regimes. Where there is reason to doubt the bona fides of the end-users, we simply deny an export licence. We will also deny a licence where we have reason to believe there is a risk of diversion of the goods in question to an end-use or end-user other than that stated on the licence application. This accords with Criterion Seven of the European Union Code of Conduct on Arms Exports. This code also binds us to take into account such criteria as the existence of internal conflicts, regional peace and security and respect for human rights when considering whether to permit the export of controlled goods.
We encourage exporting companies to adopt responsible practices to ensure their products are not being used for nefarious purposes. In line with best international practice, we promote the implementation of effective internal compliance programmes by Irish exporters and advocate enhanced pre-shipment controls and the use of risk analysis programmes. I welcome the opportunity offered by the Bill to enshrine in regulations current administrative practices requiring the submission of regular reports from companies and the production on demand of supporting documentation, which can only enhance our effectiveness in the area of end-use monitoring.
In a perfect world, there would be no need for controls and we could go about our daily business untrammelled by wars, conflicts or random acts of violence. Sadly, we do not live in a perfect world and Ireland and other like-minded countries have found it necessary to impose some constraints on our economic activities to meet these threats to peace and security. As I stated at the outset, the particular challenge we face is to put in place an effective export control system that reconciles our commitment to arms control and disarmament with our natural desire to advance our economic interests. However, our policies must not only be effective, they must also be proportionate.
Let us not forget we are a small neutral country, with a low level of armed forces and military spending in general, and we are not involved in purely defence-related industry. Against this, we have very successfully established ourselves as a location for ICT, pharmaceuticals and other high-tech enterprises, and we are committed to promoting research and innovation. We are ranked as one of the top countries in the world in which to do business and we do not wish to impose a burden of control that would diminish Ireland's attractiveness in this regard. Neither do we wish to acquire a reputation as a country with lax controls on the export of strategic goods.
Ireland has always been a voice on the international stage for disarmament and arms control. We recognise our interests are best served by a stable, secure, inclusive and co-operative environment and we continue to work with our fellow EU member states and other countries to address the challenges to global security posed by the threat of the proliferation of weapons of mass destruction and their possible use. Last December, Ireland co-sponsored a resolution at the UN General Assembly setting out the next steps towards the goal of an international arms trade treaty. We have long been one of the strongest supporters of such a legally binding instrument, negotiated on a non-discriminatory, transparent and multilateral basis, to establish standards for the import, export and transfer of conventional weapons. The European Union is fully committed to this process. Together we are working for a treaty that will contribute significantly to tackling the undesirable and irresponsible proliferation of conventional arms, which undermines peace, security, development and full respect for human rights.
The Bill is our tangible commitment to having in place a robust export control system that can best meet the challenges we face at a time of rapid geopolitical and technological developments. I commend the Bill to the House.