UK Strategic Export Controls Annual Report

September 14, 2016

The UK Government recently published its annual report1 on its export control policies. Dechert’s International Trade and EU law team highlights the main points of interest for exporters of military or dual-use goods.


In the foreword to the report, the four responsible Secretaries of State (for the Foreign Office, Defence, Business and International Development) note that export licensing in 2015 presented a range of complex challenges: “The number of conflicts worldwide and the increasing global and regional threats from terrorist groups, such as Daesh, has reinforced and increased the importance of rigorous and responsible decision-making on export controls.” Nonetheless, licensing continued apace, with 17,550 Standard Individual Export Licence applications processed, 69% of them within 20 working days, against the published target of 70%. 

Cross-government teams 

The 2015 Strategic Defence and Security Review initiated the creation of a number of new, issue-focused crossgovernment teams with the aims of removing duplication, consolidating expertise and making the most efficient use of it across government. These include: 

  • an Exports Controls Joint Unit, hosted by the newly-created Department for International Trade. This was established in July 2016, bringing together expertise from the Export Control Organisation (ECO), the Foreign & Commonwealth Office (FCO) and the Ministry of Defence (MOD). The aim is to provide coordinated cross-government operation of export controls while maintaining a prompt and high quality licensing service for UK exporters. It is understood that, at least for the time being, the processing of export licensing applications will in practice continue as before; 
  • an Arms Control and Counter-Proliferation Centre, hosted by the MOD, which will consolidate in a single location the expertise and policy-making currently in the MOD, FCO and the former Department of Energy and Climate Change. 

Licence Suspension - Israel 

In response to Israeli operations in Gaza (Operation Protective Edge) in 2014, the UK reviewed its licensing of exports to Israel. It concluded that although the great majority of exports to Israel were not items that could be used by Israeli forces in these operations, it should suspend 12 export licences “as a precautionary measure in the event of a resumption of significant hostilities”. In 2015, the UK government decided that there was sufficient information to be able to apply standard export licensing procedures to exports to Israel and as a result the suspension of the 12 licences was lifted and the exports were permitted to go ahead. This example illustrates how licences – both applications and those that have already been issued - can be affected by changes in circumstances in destination countries and remain subject to review. 

Transparency and Accountability 

The new reporting requirements for the use of Open General and Open Individual Licences that came into force in 2014 require exporters to provide information on their use of these licences. The Government is working to check the consistency and integrity of the data and in due course will publish this in its Annual Data Report. In 2015, the strategic export control licensing statistics were, for the first time, produced to be compliant with the UK Statistics Authority’s Code of Practice for Official Statistics. The statistics are accompanied by a range of new data tables and a statistical commentary which aims to provide a brief overview of recent trends in the data presented in the data tables. 

Arms Trade Treaty (ATT) 

The ATT is a legally-binding, but nationally-enforced, treaty to regulate the international trade in conventional arms. The UK ratified the ATT on 2 April 2014, and the ATT entered into force on 24 December 2014. Current work is focused on the operation of the Treaty - Rules of Procedure, financial rules, funding, staffing the Secretariat - and on encouraging more states to accede, particularly other major exporters including China, India, Russia, and the USA. 

Lethal Autonomous Weapons 

The first informal meetings of experts to discuss Lethal Autonomous Weapons Systems were held in April 2015 and again in April 2016, to develop an understanding regarding the potential implications of fully-autonomous lethal weapons. There is growing pressure from some states and NGOs to negotiate an international ban on weapons that select and attack targets without human intervention. Others argue that such weapons are difficult to define, are not under development, and the risks are already addressed by existing international humanitarian law governing the use of weapons. Further meetings of experts are expected in 2017 and 2018 to consider possible options for controls on such weapons. 

Wassenaar Arrangement Control Lists 

A number of amendments to the Export Control Lists were approved in December 2015. The changes to the dual-use list should be incorporated into the EU Regulation by the end of this year. The texts on technologies used in consumer industries such as car production, domestic medical devices, optical mirrors for solar power installations and machine tools were substantially reviewed. Current existing controls on biological agent protection and detection were clarified, and new controls were agreed including on analogue-to-digital converters and explosive co-crystals. 

Case Studies 

The Government’s report picks out a number of sensitive destinations for which export licensing is particularly challenging: 

  • Tunisia: when assessing export licence applications, the UK Government carefully balances the need to provide support for Tunisia’s counter-terrorism operations as well as the need to uphold UK human rights values, paying particular attention to those for goods destined for the military and security forces that could be used for internal repression; 
  • Thailand: officials monitor the security situation closely and pay particular attention to any equipment for use by the Thai military or Royal Thai Police that could be used for internal repression or to aggravate existing tensions in Thailand, as well as to the risk of diversion to an undesirable end-user or end-use; 
  • Indonesia: the majority of licensed exports have been for small components destined for the Armed Forces, especially the Hawk combat aircraft. The Government pays particular regard to exports that could be used for internal repression; 
  • Maritime Anti-Piracy: the UK Government carefully assesses against the Consolidated Criteria all licence applications for weapons, ammunition, and related equipment for end-use by Private Maritime Security Companies operating on board client vessels. The main concerns when assessing these applications are whether the goods might be used for internal repression and whether there is a risk that the goods could be diverted or re-exported to undesirable end-users; 
  • Brazil: the risk of equipment being used for internal repression, especially for example in crowd control operations, remains a concern. The UK Government closely monitors political civil unrest in the country and the police response. In addition, officials work closely with the Brazilian Government to raise awareness of human rights concerns, particularly around large sporting events, drawing on lessons learned from the Olympics and World Cup. 

Licensing Data and Performance Targets

 In 2015, there were 17,458 applications for Standard Individual Export Licences. The median processing time was 17 working days. 69% were processed within 20 days, against the government target of 70%, and 98% were processed within 60 working days against the target of 99%. 

Some 2% of licence applications were refused. The grounds for the refusal were: 

  • 36% - risk of diversion to undesirable end-users; 
  • 33% - arms embargoes; 
  • 27% - to prevent the proliferation of Weapons of Mass Destruction; 
  • 13% - to protect the national security of the UK and its allies; 
  • 10% - the risk of use for internal repression; and 
  • 6% - to avoid contributing to internal tensions or conflict in the recipient country. 


“Compliance Certificates” to incentivise compliance by offering lighter-touch auditing requirements remained popular with businesses. They continued to be tightly caveated and only apply to the exports covered by a specific audit. In 2015, 300 were issued. The ECO is currently undertaking to ensure a continuing and positive impact on the compliance of the exporters holding these certificates. 

Of the routine inspections conducted by the ECO Compliance Team during 2015, 67% of companies were found to be compliant or generally compliant. 97 warning letters were issued to Company Directors due to breaches of licence conditions found during visits. Two companies were found, during a revisit, to have repeated serious compliance errors identified at earlier audits. As a result, one company had its licence suspended for a period of three months. The other had its licence revoked because it failed to respond to correspondence. 


HM Revenue and Customs continued to work with Border Force and the Crown Prosecution Service to undertake a wide range of enforcement activity throughout Financial Year 2015-16. This activity included: 

  • One prosecution for export control and trafficking and brokering offences. This concerned the export of military-grade electronics to China via Hong Kong. Mr Christopher Perkins of NXG Electronics Limited was sentenced to 21 months imprisonment reduced (full credit for plea) to 14 months suspended for 2 years, ordered to undertake 80 hours unpaid work, pay £100 victim surcharge and costs of £5,000. Confiscation proceedings were commenced; 
  • 232 seizures of strategic goods in breach of licensing requirements or sanctions and embargoes; 
  • 177 end-use ‘catch-all’ cases, where non-listed items were stopped from leaving the UK because there was a risk that the goods would be put to an illicit military or WMD end-use;
  • Five compound penalties totalling £61,200. 

HMRC continues to receive and process voluntary disclosures of errors made by exporters. Action taken ranges from educational visits or the issuing of written warnings, through to compound penalties and, in the most serious cases, an investigation with a view to criminal prosecution. 

Saudi Arabia and Yemen 

Although it falls just outside the period covered by the Government’s annual report, it is worth recalling here that UK arms sales to Saudi Arabia are currently subject to a judicial review, following an application by an NGO, Campaign Against the Arms Trade in the light of the actions of the Saudi-led coalition against rebels in Yemen. The claim calls on the government to suspend all extant licences and stop issuing further arms export licences to Saudi Arabia for use in Yemen while it holds a full review into whether the exports are compatible with UK and EU legislation. It is understood that a three-day review will take place in front of two judges no later than 1 February 2017. 

Separately, the Parliamentary Committees on Arms Export Controls has been conducting an inquiry into the use of UK-manufactured arms in Yemen2 . The Committees have looked into the scale of UK arms sales to the gulf region, the role the trade plays in advancing UK interests, if weapons manufactured in the UK have been used by the Royal Saudi Armed Forces in Yemen, if any arms export licence criteria have been infringed and, if so, what action should be taken in such cases. The Committees’ report is expected to be published in the next month. 

As the market for around a half of the UK’s total defence exports, even a minor shift in licensing policy towards Saudi Arabia would have serious repercussions, not only for UK exports but for the longstanding strategic relationship between the two countries, at a critical time given developments elsewhere in the Middle East. 

How can Dechert help? 

Breaches of export controls are a criminal offence and can result in the seizure of goods, an unlimited compound penalty and/or prison. Companies that export military or dual-use goods need to ensure that their compliance procedures are fully effective in determining whether their items require a licence and if so which licence is most suitable, and in fulfilling the conditions of their licences. 

Dechert’s International Trade and EU Law Team has unique expertise in helping our clients to achieve full compliance with export controls and sanctions (US as well as UK, EU and other national jurisdictions) in ways which are proportionate to their level of risk, integrated with other trade compliance requirements and which minimise the impact on their business. 


1) United Kingdom Strategic Export Controls Annual Report 2015 Available at: rt_on_Strategic_Export_Controls_2015.pdf

Subscribe to Dechert Updates