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Cluster Munitions (Prohibitions) Bill [HL]

My Lords, as noble Lords will know, the Convention on Cluster Munitions makes no mention of the provision of moneys in regard to cluster munitions development or production. It is not one of the prohibitions included in the convention. The Bill is designed to implement the convention and therefore does not include specific mention of such financing or investment. However, in response to the valid interest of concerned parliamentarians and civil society, I clarified the Government’s position on such financing in a Written Ministerial Statement on 7 December 2009. The issue was also debated at Second Reading. If it would be helpful, I am happy once again to outline the Government’s position and to reassure your Lordships of our commitment to preventing the financing of cluster munitions production. Under the Bill, the direct financing of cluster munitions production or development would be prohibited. In addition, we are committed to working with interested parties to promote a voluntary code of conduct to prevent indirect financing by the private sector. We will also review public investment guidelines to the same end. While reserving the right to legislate in the future, if necessary, I feel strongly that this is the most constructive way forward. It would certainly place the UK once more in the forefront of international action. Only a minority of states parties that have so far ratified have explicitly set out positions on financing. None of these has gone so far as to try to prevent direct and indirect financing in both the public and private sectors. I do not need to tell your Lordships that some of the financial products that could be covered by a prohibition on indirect financing, such as syndicated loans or participation in revolving credit facilities, can be very complex. They can often involve multiple parties, cross jurisdictions and have ultimate beneficiaries several times removed from the originator. I understand that it can be difficult and costly to exit these arrangements. I therefore fear that legislating without significant prior consultation might place some institutions automatically in breach of the prohibitions once they become law. In addition, we have not had the opportunity to assess the impact of this action on the UK’s financial sector. This is why we have preferred the voluntary route initially and I am confident that we can make a difference. As noble Lords know, our priority is the passage of this Bill and the ratification of the convention. I am eager, as I know many of your Lordships are, to ensure that the UK becomes a state party as soon as possible. Once this has been achieved, we will be able to work on the consultation process for the private and public sectors. I would therefore hope that the noble Lord will withdraw his amendment.