IV. The Regulation and Control of Defence Businesses

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Notes

¹ For a clear analysis and historical background, see Lucinda Maer and Oonagh Gay, ‘Official Secrecy’, Standard Note SN/PC/02023, House of Commons Library, 30 December 2008.

² For a clear analysis and historical background, see Lucinda Maer and Oonagh Gay, ‘Official Secrecy’, Standard Note SN/PC/02023, House of Commons Library, 30 December 2008.

³ See Cabinet Office, ‘List X Contractual Process’, version 3.0, October 2009, paras. 14–18.

⁴ See David M Walker, DoD Transformation Challenges and Opportunities (Washington, DC: Government Accountability Office, November 2007).

⁵ See ‘Allgemeine Verwaltungsvorschrift des Bundesministeriums des Innern zum materiellen und organisatorischen Schutz von Verschlusssachen (VS-Anweisung – VSA) vom 31. März 2006’.

⁶ ‘Vergabeverordnung für die Bereiche Verteidigung und Sicherheit [VSVgV] zur Umsetzung der Richtlinie 2009/81/EG des Europäischen Parlaments und des Rates vom 13. Juli 2009 über die Koordinierung der Verfahren zur Vergabe bestimmter Bau-, Liefer- und Dienstleistungsaufträge in den Bereichen Verteidigung und Sicherheit und zur Änderung der Richtlinien 2004/17/EG und 2004/18/EG’, para. 7.

⁷ DoD Defense Security Service, ‘Comparison: Special Security Agreement and Proxy Agreement’, <http://www.dss.mil/isp/foci/compar_spec_sec_prox.html>, accessed 14 October 2013.

⁸ See ‘Council Common Position 2008/944/CFSP of 8 December 2008’, Official Journal of the European Union, L 335/99, 13 December 2008, <http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:335:0099:0103:EN:PDF>, accessed 16 October 2013.

⁹ Richard Norton-Taylor, ‘UK Refuses to Suspend Egypt Arms Sales’, Guardian, 8 February 2011; Brian Rohan, ‘Germany Suspends Arms Exports to Egypt’, Reuters, 7 February 2011.

¹⁰ See Gordon Adams, Christophe Cornu and Andrew James, ‘Between Cooperation and Competition: The Transatlantic Defense Market’, Chaillot Paper No 44, ISS-WEU, January 2001.

¹¹ C Forrester, ‘US Re-Opens ITAR Category XI to Comment’, Jane's Defence Weekly, 31 July 2013, p. 21; M Smith, ‘US Announces Latest Amendments as Part of Export Control Reform’, Jane's Defence Weekly, 17 July 2013, p. 21.

¹² European Commission, ‘Strategic Export Controls: Ensuring Security and Competitiveness in a Changing World – A Report on the Public Consultation Launched under the Green Paper COM(2011) 393’, EU Commission Staff Working Document, 17 January 2013; B Tigner, ‘Striking a Balance: Reforming the EU's Export Control Regime’, Jane's Defence Weekly 17 July 2013, p. 23.

¹³ HM Government, Strategic Export Control: Her Majesty's Government's Annual Report for 2010, Quarterly Reports for 2010 and 2011, Licensing Policy and Parliamentary Scrutiny Response of the Secretaries of State for Defence, Foreign and Commonwealth Affairs, International Development and Business, Innovation and Skills, Cm 8441 (London: The Stationery Office, October 2012), pp. 14–15.

¹⁴ See Roy Anderson, Defence Research and Technology (London: MoD, February 2007).

¹⁵ See Council of the European Union, ‘Acts Adopted Under Title V of the EU Treaty: Council Common Position 2008/944/CFSP of 8 December 2008 Defining Common Rules Governing Control of Exports of Military Technology and Equipment’, Official Journal of the European Union (L335/99, 13 December 2008), Article 1.2; Keith Hartley, ‘Defence Industrial Policy in a Military Alliance’, Journal of Peace Research (Vol. 43, No. 4, 2006), pp. 473–89.

¹⁶ Act to implement Article 26 (2) of the Basic Law (War Weapons Control Act) in the version promulgated on 22 November 1990’, Federal Law Gazette I, p. 2506 (as last amended by Article 24 of the Ordinance of 31 October 2006, Federal Law Gazette I, p. 2407).

¹⁷ Revised by notification of 27 May 2009, Federal Law Gazette I, p. 1150.

¹⁸ Foreign Trade and Payments Ordinance in the version promulgated on 22 November 1993’, Federal Law Gazette I, p. 2493, last amended by the ‘83^rd Ordinance Amending the Foreign Trade and Payments Ordinance of 19 October 2009’, Federal Law Gazette (No. 164), p. 3737.

¹⁹ ‘Political Principles Adopted by the Government of the Federal Republic of Germany for the Export of War Weapons and Other Military Equipment’, 19 January 2000.

²⁰ The military equipment is listed in full in Part I, Section A of the Export List (EL, Annex to Foreign Trade and Payments Ordinance). It is broken down into twenty-two positions (No. 0001 to No. 0022) that have their own sub-divisions. As with the EU's Military List, these positions are closely oriented to the corresponding list of the Wassenaar Arrangement (Munitions List), which the German government has thereby converted into national law to meet its political commitments.

²¹ Section 1 in conjunction with Section 3 of the Foreign Trade and Payments Act, unless a licence may be denied because of a violation of interests protected under Section 7 Subsection 1 of the Foreign Trade and Payments Act. See Section 7 Subsection 1 (1-3) of the Act.

²² Department for Business, Innovation and Skills (BIS), Strategic Export Controls, ‘Country Pivot Report’, 1 April 2012–30 June 2002, pp. 3, 7.

²³ BIS, ‘Open Licences: An Overview’, <https://www.gov.uk/open-general-licences-an-overview>, accessed 16 October 2013. See also: BIS, ‘Military Goods Open General Export Licences’, <https://www.gov.uk/military-goods-ogels>.

²⁴ See David Oliver, ‘Current Export Policies: Trick or Treat’, Defense Horizons (No. 6, December 2001).

²⁵ Directorate of Defense Trade Controls, ‘International Traffic in Arms Regulation: ITAR Summary, Definitions and Subchapters’, Department of State, <http://pmddtc.state.gov/regulations_laws/itar_official.html>, accessed 16 October 2013.

²⁶ See Walter Pincus, ‘Taking Defense's Hand out of State's Pocket’, Washington Post, 9 July 2007.

²⁷ Adams, Cornu and James, “Between Cooperation and Competition’.

²⁸ National Audit Office, Carrier Strike: The 2012 Reversion Decision, Report by the Auditor and Comptroller General, HC 63 (London: The Stationery Office, May 2013), p. 11.

²⁹ Article 4 reads: ‘Member states shall circulate details of applications that have been denied … together with an explanation … Before any Member State grants a licence that has been denied by another member State … for an essentially identical transaction within the last three years, it shall first consult the Member State or States which issued the denial(s). If, following consultations, the Member State nonetheless decides to grant a licence, it shall notify the Member State or States issuing the denial(s) giving details of its reasoning.’

³⁰ The government position quoted in House of Commons Business, Innovation and Skills, Defence, Foreign Affairs and International Development Committee, Scrutiny of Arms Exports (2012): UK Strategic Export Controls Annual Report 2010, Quarterly Reports for July to December 2010 and January to September 2011. The Government's Review of arms exports to the Middle East and North Africa, and Wider Arms Control Issues, Vol. 1 (London: The Stationery Office, July 2012), p. 6.

³¹ See ‘Frühzeitige Veröffentlichung der Rüstungsexportberichte sicherstellen – Parlamentsrechte über Rüstungsexporte einführen’, Antrag der SPD Fraktion, Drucksache 17/9188, 28 March 2012. Translation by the author.

³² Gernot Erler, ‘Rüstungsexporte’, SPD press release, 21 September 2012. Translation by the author.

³³ Thomas de Maizière, quoted in Augengeradeaus.net, ‘De Maizière zu Rüstungsexporten’, 21 September 2012. Translation by the author.

³⁴ Thomas de Maizière, quoted in Spiegel Online, ‘Panzer für Saudi-Arabien: De Maizière verteidigt möglichen “Leopard”-Deal’, 9 July 2011. Translation by author.

³⁵ US Congress, Arms Export Control Act 1976.

³⁶ See B Salzman, ‘Passed At Last: The US/UK Defence Trade Treaty’, 7 October 2010.

³⁷ Thomas de Maizière, quoted in Die Welt, ‘Verteidigungsminister de Maizière verteidigt Rüstungsexporte’, 5 August 2012. Translation by the author.

³⁸ Angela Merkel, quoted in N-TV.de, ‘Instrument der Friedenssicherung: Merkel wirbt für Rüstungsexporte’, 22 October 2012. Translation by the author.

³⁹ HM Government, United Kingdom Strategic Export Controls Annual Report 2011 (London: The Stationery Office, July 2012).

⁴⁰ UK Foreign Office homepage, <http://www.fco.gov.uk >, accessed 12 June 2013.

⁴¹ See Transparency International, ‘Our Work With the Defence Industry’, <http://www.ti-defence.org/what-we-do/defence-industry>, accessed 17 October 2013; in particular, Martin Pyman et al, ‘Defence Companies Anti-Corruption Index’.

⁴² H Alexander, ‘World Reaction to Egypt Coup’, Daily Telegraph, 4 July 2013; Robert Fisk, ‘When is a Military Coup not a Military Coup’, Independent, 4 July 2013; K Ghattas, ‘Egypt is Still not a Military Coup in Washington’, BBC News, 18 July 2013.

⁴³ See US Department of State, ‘Foreign Military Financing (FMF)’, <http://www.state.gov/t/pm/65531.htm>, accessed 2 October 2013; see also ‘Foreign Military Financing Account Summary’, <http://www.state.gov/t/pm/ppa/sat/c14560.htm>, accessed 2 October 2013; US Census website, <http://www.census.gov/compendia/statab/2012/tables/12s1299.pdf> and <http://www.census.gov/compendia/statab/2012/tables/12s1298.pdf>, accessed 16 October 2013.

⁴⁴ Simeon Kerr, ‘Oil Rich States Step Up Market Presence’, Financial Times, 10 September 2007.

⁴⁵ Jacques S Gansler, Democracy's Arsenal: Creating a Twenty-First Century Defence Industry (Cambridge, MA: MIT Press, 2011), p. 151.

⁴⁶ Lincoln Bloomfield, Jr, Export Controls and Technology Transfers: Turning Obstacles into Opportunities (Washington, DC: Hudson Institute, 11 September 2006).

⁴⁷ B Benowitz and B Kellman, ‘Rethink Plans to Loosen US Controls on Arms Exports’, Arms Control Today (April 2013).

⁴⁸ See Gansler, Democracy's Arsenal.

⁴⁹ ‘Gesetzes über die Voraussetzungen und das Verfahren von Sicherheitsüberprüfungen des Bundes (Sicherheitsüberprüfungsgesetz – SÜG)’, para. 25.

⁵⁰ See UK Trade and Industry, ‘Export Control’, <http://www.ukti.gov.uk/defencesecurity/defence/exportcontrol.html>, accessed 2 October 2013.

⁵¹ BIS, Strategic Export Controls, ‘Country Pivot Report’, pp. 3, 7.

⁵² EU Commission, ‘Directive 2009/43. EC of the European parliament and the Council, 6 May 2009: Simplifying Terms and Conditions of Transfers of Defence-Related Goods within the Community’, Official Journal of the European Union (10 June 2009).

⁵³ See, for instance, ‘Why Do US Export Controls Affect Non-US Companies’, <http://www.thefreelibrary.com/US+Export+Controls+and+Non-US+Companies-a01073983734>, accessed 2 October 2013.

⁵⁴ Any merger projects with a Community dimension are examined by the European Commission in Brussels. According to article 1 of ‘Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the EC Merger Regulation)’, a concentration has a Community dimension where ‘(a) the combined aggregate worldwide turnover of all the undertakings concerned is more than EUR 5000 million; and (b) the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than EUR 250 million, unless each of the undertakings concerned achieves more than two-thirds of its aggregate Community-wide turnover within one and the same Member State’.

In addition to these thresholds, EC No 139/2004 assumes a concentration with a Community dimension where ‘(a) the combined aggregate worldwide turnover of all the undertakings concerned is more than EUR 2500 million; (b) in each of at least three Member States, the combined aggregate turnover of all the undertakings concerned is more than EUR 100 million; (c) in each of at least three Member States included for the purpose of point (b), the aggregate turnover of each of at least two of the undertakings concerned is more than EUR 25 million; and (d) the aggregate Community-wide turnover of each of at least two of the undertakings concerned is more than EUR 100 million, unless each of the undertakings concerned achieves more than two-thirds of its aggregate Community-wide turnover within one and the same Member State.’

⁵⁵ Bundesregierung, ‘Regierungspressekonferenz vom 15. August 2012’, <http://www.bundesregierung.de/Content/DE/Mitschrift/Pressekonferenzen/2012/08/2012-08-15-regpk.html>, accessed 2 October 2013.

⁵⁶ In July 1993, US Secretary of Defense William Perry urged the top US defence companies to merge and consolidate to reduce overhead as procurement declined. At a Pentagon dinner (dubbed the ‘Last Supper’), Perry pledged to support efforts by the defence industry to undertake its own consolidation.

⁵⁷ Spiegel Online, ‘Rüstungsindustrie: Verteidigungsministerium stoppt Lobbyarbeit von Ex-General’, 6 November 2010, <http://www.spiegel.de/politik/deutschland/ruestungsindustrie-verteidigungsministerium-stoppt-lobbyarbeit-von-ex-general-a-727674.html>, accessed 2 October 2013.

⁵⁸ Packard Commission, ‘Survey of Public Opinion on Defense Procurement’, GPO, 1986.

⁵⁹ Gansler, Democracy's Arsenal, p. 193.

⁶⁰ See the Grace Commission, ‘Final Report of the President's Private Sector Commission on Government Management’, GPO, 1985.

⁶¹ See Center for Strategic and International Studies (CSIS), Better Buying Power Initiative 2.0 (Washington, DC: CSIS, 14 November 2012).

⁶² P Earley, ‘Sherick Seeks to Plug Pentagon Dyke’, Washington Post, 26 November 1984.

⁶³ Gansler, Democracy's Arsenal, p. 197.

⁶⁴ Gansler, Democracy's Arsenal, p. 197.

⁶⁵ Germany sits alongside only Australia in Band A, while Band B also includes Austria, Norway, South Korea, Sweden and Taiwan. See Transparency International, <http://government.defenceindex.org/results/overall>, accessed 2 October 2013.

⁶⁶ Now located within the System Award Management System, see <https://www.sam.gov/portal/public/SAM/>, accessed 2 October 2013.

⁶⁷ David Leigh, Rob Evans and Mark Tran, ‘BAE Pays Fines of £285m over Arms Deal Corruption Claims’, Guardian, 5 February 2010.

⁶⁸ Mark Pyman and Tiffany Clarke, ‘Raising the Bar: Good Anti-Corruption Practices in Defence Companies’, Transparency International, June 2013.

⁶⁹ R Zelnio, ‘The Effects of Export Control on the Space Industry’, Space Review, 16 January 2006, <http://www.thespacereview.com/article/533/1>, accessed 2 October 2013.