5. Arms brokering and transport services

Amnesty International and other NGOs have repeatedly documented the impact of arms brokers operating from Europe in fuelling human rights abuses in many parts of the world.(107) From the genocide in Rwanda to the bloody conflicts in Liberia, Sierra Leone and the DRC, brokers have taken advantage of the lack of effective export controls within the European Union.

Arms brokers are experts at using "shell" companies, shipping agents and distributors to arrange the sale of arms and weapons to human rights crisis and conflict zones. Because of the lack of effective controls at the national, EU and international level, the brokers, transportation agents, intermediaries and those providing financial services for such third party arms transfers rarely break export laws and can operate with impunity despite the serious human rights abuses caused by such arms transfers.(108) The following cases illustrate the concerns that Amnesty International has regarding the weak or non-existent controls on arms brokering.

Italy:
On 5 August 2000 Italian police arrested arms broker and dealer Leonid Minin, near Milan. Documents found in his hotel room reportedly detailed illegal sales of arms to the Revolutionary United Front (RUF) in Sierra Leone. (109) The RUF have committed widespread and gross human rights abuses against civilians in Sierra Leone and have been subject to a UN embargo. However, despite the evidence against him, Minin was released in December 2002 as the Italian Supreme Court argued that it could not prosecute him because the trafficked weapons had not touched Italian soil and were not covered by Italian law.(110)

France:
In September 2003, the Angolan government appointed French billionaire businessman Pierre Falcone as its ambassador to UNESCO.(111) This was a highly unusual act as Falcone was then, and still is, under investigation by the French authorities for illegal arms trafficking to Angola. UNESCO representatives expressed their shock and dismay at this appointment, adding it was unacceptable that an arms trafficker was now a member of the agency.(112) In November 2003, French actress Catherine Deneuve resigned as UNESCO Goodwill Ambassador protesting Falcone's nomination.(113)

Pierre Falcone's involvement in the "Angolagate" scandal came to light when French judicial officials found that Brenco International, a company owned by Falcone, was involved in arms transfers to the Angola government and had made payments to a number of his French associates.(114) Falcone was a consultant to the French government agency SOFREMI, which exports military equipment under the auspices of the French Interior Ministry. He had also developed good contacts in the Eastern European arms business through Russian émigré businessman Arcadi Gaydamak who was based in Israel. In November 1993, Pierre Falcone and Arcadi Gaydamak had allegedly helped arrange the sale of small arms to Angola worth US$47 million. In 1994, they reportedly arranged a second deal for US$563 million-worth of weapons, including tanks and helicopters. The Angolan government reportedly paid for the weapons with oil.(115) The civil war in Angola has taken the lives of hundreds of unarmed civilians each year at the hands of both government forces and the National Union for the Total Independence of Angola (UNITA). Human rights abuses reported included torture, mutilation, abductions and killings. In 2001 alone, the armed conflict and insecurity were responsible for 300,000 people being forced to flee their homes, bringing the number of internally displaced people to four million.(116) In December 2001, Falcone was released on bail whilst the French authorities investigated charges that he broke French arms control laws between 1993 and 1994. He was placed under investigation again in April 2002 for illegal arms trading in the post 1994 period.

Falcone's lawyer argued that Falcone has total immunity from prosecution because of his new status as an Angolan diplomat. However the French authorities have said the immunity only covers acts related to his diplomatic functions. On 14 January 2004 France issued a global arrest warrant for Pierre Falcone. The arrest warrant was issued after Falcone reportedly refused to appear before a judge and left France, breaching his probation terms.(117) Despite such actions Amnesty International is still concerned that France does not have adequate laws covering the brokering of arms transfers outside French territory by French nationals and residents.(118)

Czech Republic:
Following a joint Czech-German-Swiss investigation in August 2002, two Czech nationals were arrested in the Czech Republic and a Russian arms broker with Canadian citizenship was arrested in Germany. The three were accused of engaging in a criminal conspiracy to broker the sale of Russian and Bulgarian weapons to Middle Eastern countries beginning in 1999. Czech officials declined to name the destination countries for the weapons, but a Czech parliamentarian confirmed to the Christian Science Monitor that the weapons were suspected to have gone to Syria, Iran, and Iraq.(119) They reportedly did not pass through Czech territory, but the sales allegedly were brokered through the Czech branch of a Canadian company. None of the deals were licensed by Czech authorities because the company was only registered to conduct marketing activities.(120)

Arms transport services

The brokering of international arms transfers, especially for illegal or illegitimate clandestine purposes, is very closely associated with deliveries of cargoes by sub-contracted arms transporting businesses. Thus, arms brokers often operate their own arms transport networks, or deal with their trusted cargo charter operators, freight forwarding agents, and insurers.(121) Not all the sub-contractors will be equally informed of the details of such dubious arms deliveries, but usually the key actors on arms transporting will be "in the know". Despite this, few EU governments appear to have specific controls on arms transporters other than the customs and transport safety mechanisms for moving regular goods across their own borders.

Denmark :
In March 2003, a cross-party parliamentary group in Denmark challenged both the Minister of Justice and the Minister of Foreign Affairs as to why Danish shipping companies were continuing to transport arms to countries such as Myanmar, China, and Sudan. Despite these countries being subject to EU embargoes that prohibit the export of weapons to repressive governments, Danish shippers are circumventing the legislation by claiming that they are only transporting, not exporting, weapons. A spokesperson for the Stockholm International Peace Research Institute (SIPRI) stated that: "Denmark is one of the only countries where ships carrying arms are allowed to sail to countries blacklisted by the EU."(122)

Ireland:
In 2002, the involvement of an Irish registered company with an international arms smuggling operation was revealed. The company, Balcombe Investments Limited, owned the aircraft operated by Renan Airways of Moldova to fly several shipments of illegal arms to Africa. (123)

In December 2000, a United Nations report briefly mentioned suspicious dealings involving Renan Airways. A subsequent UN report on the arms embargo on neighbouring Liberia, confirmed those suspicions, identifying Renan Airways as having flown unauthorised cargos of arms from Moldova to Liberia. The report also detailed how Renan Airways had worked with another company, Central African Airlines - owned by former KGB officer Viktor Bout - to ship illegal arms to Sierra Leone.

Balcombe Investments was registered in Ireland in 1992 by a Dublin-based company formation agent on behalf of an Isle of Man company, Portman Consultants Ltd. Company formation agents are not generally aware of the activities of their client companies and would have had no knowledge of Balcombe's arms trade link. The day after Balcombe Investments was formed it got a new set of directors based in the Channel Islands and employed by Portman Consultants. From then on Balcombe Investments was essentially a company of convenience which was used to register aircraft in Moldova.(124)

When contacted by the Irish Examiner and asked about illegal arms sales to Africa, a Renan spokesman said: "Balcombe Investment have some aircraft. We transport cargo world-wide, they are the owners and we are the operators. It is an offshore company, so they acquire some aircraft and register it in the Republic of Moldova."(125)


EU initiatives to control brokers, transportation agents and financiers:

Currently, the majority of EU Member States still do not effectively regulate the activities of arms brokers and transportation agents. According to a recent survey by GRIP and Pax Christi only Austria, Belgium, Finland, France, Germany, The Netherlands and Sweden have specific controls on brokering of conventional arms – though a number of other EU states such as the UK have been in the process of enacting some controls. (126) Elements of best practice seem to be found in the Finnish, Belgian, Swedish and German controls. It should be noted that some new Member States have also instituted new legislation or administrative controls on arms brokering that, on paper, appear to be in advance of many of the EU Member States.

Belgium: good practice regarding extra-territoriality
Arms brokering activities in Belgium fall under the March 2003 amendment to the 1991 Law on the Import, Export, Transit and Combat against Trafficking in Arms and Ammunition. Weapons covered by this law include military small arms and light weapons as well as related ammunition. Belgian nationals as well as foreign residents and dealers in Belgium require a license to negotiate, export or deliver abroad, or possess to this end, military equipment, or intervene as intermediary in these operations, irrespective of the origin or destination of goods and whether or not the goods enter Belgian territory. An intermediary is whoever, for profit or free of charge, creates the conditions for the conclusion of a contract entailing the above operations, or whoever concludes such a contract if the transport is undertaken by a third party. All persons and entities wishing to trade arms and ammunition require a prior registration.

Persons found guilty of arms brokering without a licence outside Belgian territory can be prosecuted if the accused is found on Belgian territory even if the Belgian authorities have not received a complaint from the foreign authorities. Violations and attempted violations of the Belgian legislation on arms brokering are punishable by imprisonment of up to five years and/or a monetary fine.(127)

Slovakia:
Following the numerous arms scandals reported by the UN and others, legal reforms were adopted in July 2002 imposing brokering controls for the first time. The law provides that only Slovak individuals and companies can act as arms brokers and subjects them to the same two-tiered licensing system as has been applied to arms trading companies. These brokering controls are intended to apply to arms deals carried out by Slovak arms brokers, even where the weapons do not pass through the territory of Slovakia. (128) However, it is still debatable whether these reforms are yet being put into practice.

Although a number of EU states have made positive attempts to regulate the activities of arms brokers and transportation agents, there is a real danger that their controls will be undermined by other states in the EU that have not yet adopted such controls, or have adopted weaker controls. As the previous case studies show, arms brokers are adept at finding the weaknesses of control regimes.

On 24 July 2002, the Export Control Act was promulgated replacing the outdated 1939 law that previously regulated UK arms exports. Among other things, the new law brings the activities of UK-based arms brokers under the control of the government for the first time. However, the proposed secondary legislation indicates that the government does not intend to control all UK brokering deals, despite an election manifesto pledge to 'control the activities of arms brokers and traffickers wherever they are located.' Instead, when the deal takes place abroad or offshore, the UK government has opted to control only deals involving torture equipment, embargo-breaking and long-range missiles. While this is a welcome move, it leaves deals involving all other types of conventional weapons to non-embargoed destinations unregulated.

The need for such powers to be extended to non-embargoed destinations is demonstrated by the case of Essex based arms-dealer, Mick Ranger, who has run a lucrative arms brokerage with operations in Bulgaria, Cyprus, Nigeria, Australia, South Africa and Vietnam.(129) He was reported to be prepared to organise the transfer of 200 rifles from Bulgaria to Syria, despite the fact it was "clear the weapons might be used in Iraq." (130) However, Ranger 'would not agree to any deal where Iraq was mentioned in official documents.' If any potential deal had been made by any of his overseas offices it would not be subject to the UK legislation.

Under the proposed new law, UK arms brokers acting abroad will not need to apply for a licence to transfer weapons to a country neighbouring an embargoed destination. As pointed out by Saferworld, "in order for the proposed legislation to be effective in this regard, the government would have to prove that the broker knew that the ultimate end-user was an embargoed entity, which is likely to be very difficult indeed. Such a loophole could undermine one of the main rationales behind the current proposals, ie that UK persons should not be able to broker arms to embargoed destinations". (131) In the absence of such proof of intent, there will be nothing to stop an arms broker living in Northern Ireland from stepping over the (open) border to the Irish Republic, brokering a deal there, and then stepping back again to Northern Ireland for his tea. Neither Irish law (which does not control brokering at all) nor the new UK law (which would not have the extraterritorial reach) could stop this.

European efforts to secure other international controls on brokering

Following the lead taken by Norway in the Oslo Meetings of like-minded states since 1999, EU Member States have recognised the need for coordinated regional and international measures to control arms brokers. For example in March 2001, the Swedish government (then acting EU President) introduced a submission to the Preparatory Committee for the United Nations Conference on the Illicit Trade in Small Arms and Light Weapons committing the European Union to introducing a legally binding instrument on arms brokering.(132) Unfortunately the EU proposal foundered in the UN due to opposition from states such as the US, China, Russia and the Arab League.

Nevertheless, the EU proceeded to develop and agree in June 2003 what is considered to be a legally binding "Common Position" on arms brokering (see below), the OSCE agreed in September 2003 a Best Practice Guide on National Control of Brokering Activities, and the Wassenaar Arrangement agreed in December 2003 a set of common Elements for Effective Legislation on Arms Brokering.

This flurry of activity was propelled by NGO campaigning and the concerns of some governments, including in the EU, especially about international organised crime and terrorism.(133) A further significant factor has been the example shown by the USA, which has the most comprehensive law on brokering, introduced in 1996 as an amendment to the Arms Export Control Act. This law covers a wide range of activities and incorporates a strong extra-territorial component that: "requires US brokers living anywhere and foreign nationals residing in the United States to register and obtain licenses for all arms deals they transact. Not only does the law empower US implementing and enforcing agencies to keep tabs on the number of brokers and the type of their operations, it also subjects violators to US jurisdiction wherever an offence has been committed."(134) There is anecdotal evidence that the US law has acted as a deterrent to private US nationals and residents engaging in illegal trafficking, but most EU governments are not yet willing to embrace similar laws.


Wassenaar Arrangement
In December 2003, the Wassenaar Arrangement (WA) - the group of leading conventional arms exporting countries, including many EU and new Member States - agreed a set of common Elements for Effective Legislation on Arms Brokering.(135) Although this is only a politically binding agreement, WA Participating States agreed to: "Strictly control the activities of those who engage in the brokering of conventional arms by introducing and implementing adequate laws and regulations."

The focus is on controlling brokering activities in "third countries", although it falls short of requiring wide extra-territorial controls. "For activities of negotiating or arranging contracts, selling, trading or arranging the transfer of arms and related military equipment controlled by Wassenaar Participating States from one third country to another third country, a licence or written approval should be obtained from the competent authorities of the Participating State where these activities take place whether the broker is a citizen, resident or otherwise subject to the jurisdiction of the Participating State…Similarly, a licence may also be required regardless of where the brokering activities take place."

"Records should be kept of individuals and companies which have obtained a licence...[and]... Participating States may in addition establish a register of brokers."

"Where brokering provisions do not currently exist, Participating States will work without delay to introduce appropriate provisions to control arms brokering activities."


The EU Common Position on Arms Brokering:

Amnesty International has repeatedly warned EU governments that unscrupulous arms brokers will just find the EU country with the weakest controls in the newly expanded Europe to conduct their business and so, in order to help protect human rights, a common high level of control is needed throughout the enlarged EU. With the adoption in June 2003 of an EU Common Position on Arms Brokering, EU governments took a significant first step towards a binding international regulation. (136)

Under this Common Position EU member states are now required to "take all the necessary measures to control brokering activities taking place within their territory." The lawful engagement of such activities will require "a license or written authorisations…from the competent authorities of the Member State where these activities take place" and Member States will assess applications "for specific brokering transactions against the provisions of the EU Code of Conduct on Arms Exports."

Amnesty International welcomes this Common Position as a first step but is concerned that the agreement has a number of fundamental weaknesses that, if not corrected, will seriously undermine its effectiveness, namely:

· It only encourages, but does not oblige EU Member States to "consider controlling brokering activities outside their territory carried out by brokers of their nationality resident or established in their territory" and no mention is made of controlling EU citizens who both reside and broker abroad.
· It is left to the discretion of member states to decide whether to register arms brokers, thereby losing the advantages of a compulsory register, kept by each member state, that would help ensure that bona fide arms brokers are kept abreast of changes to export control law and those applicants with criminal convictions in related activities are refused permits; this would also greatly assist effective cross-border information-exchanges to prevent illicit trafficking.
· It omits the key ancillary services upon which arms brokering depends, such as arms transportation, shipping and financial services, thereby reducing the chances of curbing networks of brokers and their partners who may be complicit in illegal trafficking or supplying foreign customers contrary to the EU Code Criteria.


Lessons to be learned:

The EU Common Position is an important step forward in the fight against unscrupulous arms brokers and all EU Member States must implement it fully without delay. However, Member States will have to address, during the ongoing review of the EU Code, the three major problems with the Common Position outlined above if they are to effectively prevent the illegitimate and destructive activities of arms brokers and their associates. As numerous UN reports on arms embargo violations have illustrated, without these three areas of control such actors easily create clandestine international networks across continents using tax havens to reap profits including from arming known human rights abusers and war criminals. Finland, Belgium, Slovakia and Sweden have already enacted legislation that incorporates an extra-territorial element and there is no reason why such elements cannot be adopted throughout the EU.