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Chris Henley KC looks beyond the headlines to consider offences that can arise under the Export Control Order 2008.
A series of reports appeared in the media on Monday 8th February 2021 raising the imminent prospect of large-scale arrests of academics at some of Britain’s top universities – ‘Almost 200 British academics…could face jail over fears they inadvertently helped China develop weapons of mass destruction’ (Daily Mail). Maximum sentences of 10 years were cited. The newspaper reported that ‘Officials are investigating the academics amid suspicion they may have breached laws designed to protect national security and human rights’.The following day, Tuesday 9th February, further reports on a broadly similar theme appeared. Tuesday’s headline in the Daily Mail was ‘Outrage as Oxford University renames its prestigious Wykeham chair of Physics after a Chinese firm ‘with links to country’s spy agency’ in return for £700,000 donation’. The same story featured in the Times. Whilst the headline was more restrained, the message was equally forthright. The article in the Times was elided with the previous day’s report about the rumoured mass arrest of academics. The clear message of these articles was that the Chinese Ministry of State Security is at work using ‘front’ software companies to secure influence over top UK academic institutions. The apparent aim is to gain access to sensitive research projects and, ultimately, to the latest innovative technology which could be used for military purposes.
Behind the lurid newspaper headlines, it is worth considering what the law says about sharing research and technology with foreign companies and agencies.
Academic institutions and their members have a duty to ensure that their working practices, agreements with outside funders and any bilateral engagements with extra-jurisdictional organisations fully comply with the regulations and fully protect their employees. Against the backdrop of current media scrutiny, they might be wise to engage external legal expertise to undertake a comprehensive review of their procedures. The implications of the Export Control Order 2008 (‘ECO’, as amended), the relevant regulation issued under Section 1 of the Export Control Act 2002, should be considered with great care.
The ECO contains general prohibitions on the export without a licence of military goods, software and technology (Art. 3).
The products (particularly, so far as academic institutions are concerned, including electronic equipment and software) which have or may have export restrictions are set out in the UK Military List or national control list; one of the international export control regimes including those set out by the Nuclear Suppliers Group, the Missile Technology Control Regime, the Australia Group and the Wassenaar Arrangement, the EU’s Torture Regulation and the UK’s Export of Radioactive Sources (Control) Order 2006. Failing appearance on one of those lists, some dual-use items are covered by Art. 4 of Council Regulation No 428/2009. It is not at present clear how the government has transposed the EU legislation into domestic law.
The regulations relating to the export of dual-use goods, software and technology are particularly nuanced. It is this area upon which the news reports were focusing. Article 2(1) of the ECO defines ‘dual-use’ as ‘usable for both civil and military purposes’. It is therefore drawn very widely, and deliberately so. Research departments, or indeed any technology and software developers, must consider the possibility that an item exported ostensibly for one purpose may be put to another use.
Part 6 of the ECO sets out the different ways in which offences may be committed. The offences are layered in levels of seriousness, depending on the relevant state of mind. The ECO amends Section 68 of the Customs and Excise Management Act 1979, increasing maximum sentence from seven to ten years: sentences approaching the maximum of 10 years may only apply when imposed under the 1979 Act if there is a knowing and deliberate breach of the prohibitions, or an attempt to affect an exportation “with intent to evade any such prohibition or restriction”. Such offences will be extremely rare, and in such cases a severe sanction is unlikely to be controversial; exporting items to a prohibited country claiming an anodyne commercial purpose but in fact knowing they are intended to advance a foreign power’s military capacity, whether to aid domestic repression or for use in hostile activity beyond its own borders, engages relatively conventional legal principles.
The levels below the most serious are more problematic. The ‘new’ offences under Part 6 of the ECO carry a maximum two-year sentence. An exporter is at risk of a two-year prison sentence if ‘the person has grounds for suspecting that goods, software or technology are or may be intended, in their entirety or in part, for WMD purposes’ (Art. 34(3)(c)). The language of ‘suspecting’ and ‘may be’ is rich with uncertainty. Further, Article 34(3)(a) states that the offence will also be committed if the person ‘has been informed’ that goods etc ‘may be intended for such use’. How authoritative the informant needs to be is not clear.
Might the mere existence of news reports from Monday be sufficient to pass the ‘has been informed’ threshold? The reports on Monday suggested that up to 200 enforcement notices would be sent to academics. Enforcement notices are not part of the statutory ECO framework, but enforcement is conducted by the Export Control Joint Unit, established in 2016, as part of the Department for International Trade. Warning letters are a more likely step for the Secretary of State to take, if there are grounds to suspect research funding relationships are providing cover for breaches of the export regulations. An anonymous source told the Times: ‘We could be seeing dozens of academics in courts before long’. This seems doubtful.
The immediate catalyst for Monday’s reports was the release of a lengthy report by the think tank Civitas, ‘Inadvertently Arming China? – The Chinese military complex and its potential exploitation of scientific research at UK universities’. There is no doubt that the report is a substantial one, raising serious issues, but the suggestion that academic scientists have been committing serious criminal offences is neither asserted nor borne out by the report. Nevertheless, the subtext of the media reports is a nervousness at a very high government level about the growing influence of China in the UK’s universities. The purpose of the pieces is to send a strong message to academics. Civitas and the Henry Jackson Institute, where one of the authors is a research fellow, are both perceived to be right-leaning think tanks with strong political links in the US and UK.
The Department for Business, Innovation and Skills published in 2010 a Compliance Code of Practicewhich has not been updated following the UK’s departure from the European Union but which contains much advice still of relevance. Universities and other academic institutions would be well advised to check their Export Controls Compliance Statement, and that they have a nominated individual in charge of monitoring compliance internally. Training amongst those employed in relevant departments should be kept up to date. Records should be checked, and internal audits of relevant procedures undertaken.
The compliance leadshould be aware of the updated UK Strategic Export Control Lists, issued by the Department for International Trade, updated regularly, and most recently in January 2021, and be familiar with those parts that are relevant to work undertaken in the academic institution.
From a practical perspective, were any academic to be called in for interview about projects they or their department might be working on, they might be well advised to consider circumspection and considerable caution before responding to questions. Not because they might have anything to hide; but the regulations, outside the top tier breach, have not been drafted with particular clarity, and questioning may be speculative. No-one would want would be to become a test case. Any experienced lawyer would insist on full disclosure of the material which has allegedly given rise to the suspicions being investigated. Given the complexity of such an enquiry, it would be reasonable to ask for advance written notice of questions. An appropriate response might be to ask the department the academic is associated with, and/or the compliance lead, to take on the burden of dealing with the issues raised.
The most troubling part of the regulations comes at the lower end of the scale. The traditional criminal burden of proof appears to be reversed, as the onus is placed on the person to show that they ‘did not know, and had no reason to suppose that the goods were destined for an embargoed destination’ (s34(2)). The requirement on a suspect to show that they had ‘no reason to suppose’ may be challenging, particularly with all the news stories now in circulation suggesting that most if not all Chinese companies are ultimately controlled by the Chinese State.
Fewer than five criminal investigations per annum were opened in relation to suspected breaches of Export Control Orders in 2018 – 2020, and by and large the government uses civil monetary penalties in lieu of prosecution. It appears that HMRC raised £700,000 in fines between March and September 2020 from alleged export control violations. Under the Customs and Excise Management Act 1979, it is a criminal offence to ship unlicensed goods. This is an offence of strict liability, covering inadvertent breaches. By virtue of section 152 of CEMA, however HMRC has a discretionary power to “compound” offences. The offender is offered the opportunity to avoid prosecution in return for the payment of a financial penalty. In addition to duty and excise breaches, HMRC uses this power regularly to deal with export control matters.
Compounding often arises where the offender makes full and voluntary disclosure of all breaches to HMRC. Where, however, breaches are discovered by HMRC through its own investigations, or through a referral from the Export Control Organisation, it is less likely to consider a compound penalty.
The proposition that the government is suddenly going to launch a series of prosecutions on the back of a panic about Chinese access to UK technology seems implausible. But as always, if the worst does happen, the best protection is to take legal advice early and review processes and procedures at the inception and at each stage of any relationship.
Chris Henley KC is a leading criminal silk with considerable experience of advising clients, before charge, who are suspected of having committed offences with complex multi-jurisdictional issues.
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