Regulatory Outlook | Export Control | January 2021

Current issues

Regulator response to Covid-19

The UK export control regulator, the Export Control Joint Unit (ECJU), has relaxed its requirements for processing licence applications until further notice. These interim arrangements include: a longer lead time on exporters obtaining supporting documentation to respond to requests for further information (RFIs); and the removal of the need to obtain original ‘wet signature’ copies of end user undertakings – the ECJU is now accepting electronic signatures on these documents. The ECJU has also announced that site audits will no longer take place and that the regulator has moved to remote audits.

Legality of the sale of arms to Saudi Arabia

The UK government’s decision making in relation to licences for the sale of arms and military equipment to Saudi Arabia
continues to be a point of legal contention. This follows a June 2019 Court of Appeal decision, overturning
an earlier High Court decision, which ruled that part of the UK government’s decision-making process for determining
if export licences for the sale or transfer of arms or military equipment to Saudi Arabia was wrong in law. The decision
prevented the UK government from granting any new licences for the export of arms or military equipment to Saudi Arabia for possible use in Yemen until that issue had been re-considered by the UK government in a lawful way.

In July 2020 the Secretary of State for International Trade, Liz Truss, informed the UK Parliament in a written statement that she had retaken her decisions regarding those licences in accordance with the earlier judgment and the UK government was able to clear the backlog of licences by early November.

The Campaign Against Arms Trade (CAAT) has since confirmed that it had filed a new judicial review application against the latest decision by the Secretary of State.

In Focus: Regulation after Brexit

What do UK businesses trading in the EU need to do now that the Brexit transition period has ended?

The overall UK framework of dual-use export controls from 1 January 2021 largely mirrors what existed prior to the end of the transition period. However, UK-based businesses involved in the export of controlled dual-use items will be subject to changes to licensing requirements and so should take the following steps:

1. Actively map any exports of items (within the scope of the UK Strategic Export Control Lists) from:
   • The UK to the EU.
   • The UK to a non-EU country.
2.  In respect of exports from the UK to the EU, apply for a new export licence to legitimise those exports. To this end
   the ECJU has published an Open General Export Licence (OGEL) for the exports of dual-use items to EU countries (including the Channel Islands).
3. In respect of exports from the UK to a non-EU country, existing licences issued by the UK (OGELs and General
   Export Authorisations) will remain valid as UK licences. However, licences issued by a EU Member State will no
   longer be valid and businesses in this situation will need to apply for a new licence in the UK. UK-businesses with dual-use export operations within the EU, should also consider the actions outlined below.

What do non-UK businesses trading in the UK need to do now that the transition period has ended?

Following the end of the transition period non-UK businesses will:

1. Require an export control licence when exporting controlled products from the EU to the UK (save that intra-EU transfer licences (Union General Export Authorisation EU001) issued before the end of the transition period will remain valid).
2. No longer be able to rely on licences granted by the UK for shipments from the EU to a third country.
3. No longer be able to rely on licences issued by a relevant licensing authority in an EU Member State for the export of items located in the UK to another non-EU third country (as outlined above).

Non-UK businesses should therefore be:

1. Actively mapping any exports (within the scope of the EU’s dual use controls) from:
   • The EU to the UK.
   • The EU to a non-EU third country (where that export relies on an export licence issued in the UK).
   • The UK to a third country (where that licence is issued by an EU Member State).
2. In respect of EU to UK exports, identifying whether they: (a) need to register for a new authorisation in an EU
   Member State to justify exports to the UK; or (b) are able to rely on an existing intra-EU licence (EU001) to justify
   those exports.
3. In respect of EU to non-EU third country exports (previously relying on a UK issued licence), registering for a new authorisation in the relevant EU Member State.
4. In respect of UK to Non-EU third country exports (previously relying on a Member State issued licence), registering for new export licences in the UK (as outlined above).

Which incoming EU laws should UK businesses be aware of, and is the UK likely to implement similar rules?

The European Commission has been proposing for some time to amend and re-cast the legislation underpinning the current European dual-use export control regime, the EU Dual Use Regulation. The proposed changes aim to harmonise, simplify, and introduce a new “human security” dimension to the existing European dual-use export control regime.

In 2019 the proposals moved a step further when the European Council issued its mandate for negotiations with the European Parliament. While the Council supports several of the changes originally proposed by the Commission, it has made material changes to key sections, including to the new human security element discussed in further detail below. On 9 November 2020, the European Parliament and the European Council reached a provisional political agreement on the revised re-cast regulation.

Regardless of how quickly the legislation moves through the EU legislative process during 2021, in our view alignment with these changes is unlikely to be a legislative priority for the UK government and is an early example of divergence between the UK and EU dual-use export control regimes.

Are there any other areas where the UK regime might start to diverge from that of the EU? If so, what should businesses do to ensure they are prepared?

In the short term, the UK has developed a robust dual-use export control regime which is independent, but inextricably
tied to the EU’s export control framework and overarching international conventions on human rights and non-proliferation (including The Wassenaar Arrangement (dealing with conventional weapons and dual use items) and the Missile Technology Control Regime). For these reasons, in the short term Brexit is unlikely to raise any barriers to the flow of dual-use goods between the UK and other EU Member States and the types of controlled items and technology is expected to remain broadly similar.

In the medium to long term, while any major departures from existing dual-use practices remain highly unlikely, at least for as long as the UK’s strategic foreign policy and defensive interests remain broadly similar to those of EU Members States, some level of divergence could creep in over time.

For example, absent of any official statements from the UK authorities, it is unlikely that the UK will prioritise alignment
of UK legislation with any re-cast version of the EU Dual Use Regulation, as outlined above. Similarly, in recent years the UK government has demonstrated a strong desire to use the UK defence industry to strengthen the UK economy.
These distinctions could be perpetuated in the medium to longer term by the UK’s shifting foreign policy interests, such  as its desire to use the UK defence industry to strengthen the UK economy in light of Brexit and the terms of any further free trade agreements that the UK finalises.

Dates for the diary

July 2021

UK government expected to publish the 24th edition of its Annual Report on Strategic Export Controls. The report
provides a snapshot of strategic export controls policy and export licensing decisions for the 2020 calendar year.