Written evidence submitted by Transparency International UK and Transparency International Defence & Security (WGN0021)

This submission reflects the views of the contributor, who is responsible for the accuracy of all claims made in the submission. It does not necessarily reflect the views of the Foreign Affairs Committee. As a written submission accepted by a parliamentary committee, it is protected in the usual way by parliamentary privilege. No legal or other action may be taken against any person on any grounds arising from the fact that they have provided such material.

INTRODUCTION

1.1  Transparency International (TI) is the world’s leading non-governmental anti-corruption organisation. With around 100 chapters worldwide, TI has extensive global expertise and understanding of corruption.

1.2  Transparency International UK (TI-UK) is the UK chapter of TI. We raise awareness about corruption; advocate legal and regulatory reform at local, national and international levels; design practical tools for institutions, individuals and companies wishing to combat corruption; and act as a leading centre of anti-corruption expertise in the UK. We are independent, non-political, and base our advocacy on robust research. Transparency International Defence & Security (TI-DS) is a global programme of Transparency International, hosted within TI-UK and dedicated to tackling corruption and strengthening transparency and accountability in the defence and security sector worldwide.

1.3  TI-UK and TI-DS welcome the Foreign Affairs Committee’s inquiry into private military companies. We wish to make this submission in order to provide the Committee with our latest research into corruption risks associated with private military and security companies, and to set out where reforms are needed to address these issues.  
 

1. THE REGULATORY LANDSCAPE IN THE UK

2.1  In the UK, about 80 percent of military training in the UK is provided by private contractors,[1] and the national industry is well regulated in relation to its activities at home. The Private Security Industry Act 2001[2] created the Security Industry Authority,[3] which is responsible for administering, monitoring and enforcing private security regulation. Compulsory licensing of staff includes a full criminal record check and staff must demonstrate a minimum competency requirement. There is also an industry code of conduct called the British Association of Private Security Companies[4] with a BAPSC Charter, which has sanctions to ensure compliance. These safeguards and norms regulating the private security sector do not, however, apply to private military companies.

2.2  However, while PMSCs are subject to some provisions of arms export control legislation, including the observance of arms embargoes,[5] UK legislation is lacking when it comes to regulating the activities of PMSCs with operations abroad and their employees. The regulation of PMSC activities abroad is limited to adherence to self-regulation by an industry association and adherence to voluntary codes. In the case of misconduct, only the most serious international crimes committed abroad can be tried in the English Courts under the International Criminal Court Act 2001.

3. SUMMARY AND BACKGROUND

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3.1  The issue of private military and security companies is an intrinsically international one, with a well-documented link to global conflict. As such, our evidence and recommendations focus on reforms and actions needed at a global level as well as those that national governments – including the UK – can take to play their role in regulating the sector, rather than focusing on the risk posed by Russian (and other hostile states) companies. A note on definitions: According to the UN Working Group on Mercenaries, PMSCs are private business entities that deliver two distinct categories of services, one entailing security services and the other military services. We consider that, although there are differences in practice for PMC and PSC, many companies also straddle the boundaries of PMSC definitions, and it is therefore useful to consider both together. For this reason, we refer to PMSCs (Private Military and Security Companies) rather than PMCs throughout this submission. TI-DS defines PMSCs as “private agents or business entities that are contracted to use, possess, direct, train, or enable lethal force or coercive cyber capabilities within or in relation to conflict, fragile, or otherwise instable environments”.

3.2  The FAC will be well aware of the security risks and international humanitarian and human rights law implications of the growing trend of outsourcing military and security functions to private actors. With this submission we would like to draw attention to the profound corruption and conflict risks presented by the growth and diversification of the global PMSC industry.

3.3  Regulatory oversight of the private military and security sector is failing to keep pace with the rapidly growing and diversifying PMSC industry, leading to heightened global risks of fraud, corruption and violence, with little in the way of accountability mechanisms at both the national and international levels. While these companies can provide vital services and perform key security functions, there is a lack of rules to prevent corrupt acts, investigate alleged violations and provide avenues for remedy when crimes are committed. Better regulation of the industry is urgently needed.

3.4  Current initiatives to try and regulate the market, such as the Montreux Document, which outlines the responsibilities of states, and the International Code of Conduct for Private Security Service Providers, which contains voluntary standards for companies that can be audited and certified, are a step in the right direction. However, these initiatives have limited support among states around the world. They do not cover some key military and intelligence services and exclude some important anti-corruption measures. Their effectiveness is also undermined by their non-binding nature. These non-binding initiatives are also insufficient as regards accountability and remedy. TI-DS thinks these initiatives don’t go far enough to address the risks posed. A stronger set of enforceable standards is needed. For these reasons, TI-DS supports current efforts within the United Nations to establish a new international framework to regulate the activities of PMSCs. 

3.5  If enacted, the recommendations we make in this submission would go far in reiterating the UK’s role as a leading proponent of the rules-based international order and mitigating the significant risks posed by PMSCs. We would welcome the Committee’s support for these recommendations, and are on hand to brief the Committee further on request.

4. KEY RECOMMENDATIONS

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4.1  Recommendation 1: The UK government should start with a review of national-level regulations, and ensuring that regulatory frameworks and legislation are comprehensive and enforceable. The UK should close the regulatory gaps at a national level for Private Military and Security Companies, both for their domestic and international activities, with specific attention to:

1. Licensing processes; the process for granting licences to PMSCs should include a stringent examination of companies’ internal policies, their compliance and due diligence mechanisms and their record of abiding by international regulations, especially on international humanitarian and human rights law and anti-corruption standards. Companies’ recruitment policies for personnel should be required to ensure background checks consider previous criminal records and any previous involvement in corrupt acts.[6] The licensing process should also include reassurance that employees, especially those operating abroad, have adequate training in corruption mitigation. Lastly, the authorisation authority or licensing entity, should be staffed and trained appropriately and have transparent procedures, and review each request on a case by case basis, ideally avoiding long-term agreements over time, or including monitoring and review mechanisms.
2. Senior level oversight mechanisms; including by appointing senior-level officials in the MoD and FCDO to improve oversight and coordination of PMSC contracts with the UK government. Parliamentary oversight of UK companies or individuals providing PMSC services abroad should be strengthened through increased reporting on these companies.
3. Training and knowledge of corruption pathways and corruption risk mitigation, human rights and humanitarian law; government personnel involved in licensing and contracting decisions should be trained to ensure a good understanding of corruption pathways and corruption risk mitigation, as well as human rights and humanitarian law in relation to PMSCs, so that they can make informed decisions about individual cases. Policy guidance and materials should also cover each of these areas in detail.
4. Expanding oversight of UK companies or persons engaged in combat activities abroad; this should include strategic, tactical, and operational activities, as well as intelligence gathering, logistics, and cyberwarfare activities in support of combat operations.
5. Contract transparency and enhanced reporting on exports of PMSC services to enable external oversight.
6. Prevention, investigation, and prosecution of misconduct, including corruption-related acts. Administrative measures, such as revoking a company’s authorisation or terminating a contract, should never replace or compromise states’ national judicial systems.

4.2  Recommendation 2: The UK should require reporting on beneficial ownership of PMSCs and subcontracting by PMSCs. Prime contractors should be required to report on all subcontracting when submitting invoices. At the very least, this should include the names of all subcontractors (including those beyond the first and second tier), their business registration and beneficial ownership status, as well as the itemised value of subcontracted services. The prime contractors should also submit all information on all potential subcontractors when submitting bids for new contracts. To strengthen the UK’s position in requiring beneficial ownership information of PMSCs, it should of course have its own house in order; we note that the Economic Crime and Corporate Transparency Bill, presented to Parliament on 22 September 2022, has the potential to – and should – be used to ensure that Companies House has the powers and resources it needs to ensure the integrity of the UK company register and the accuracy of beneficial ownership information provided to it.

4.3  Recommendation 3: The UK should drive international reform within the UN Intergovernmental Working Group on PMSCs. The efforts of the Intergovernmental Working Group provide an opportunity for the UK government to support the establishment of a legally-binding international framework to regulate PMSCs which is in line with international human rights law, international humanitarian law and anti-corruption frameworks. In addition, the UK Government should call for clear restrictions on states hiring PMSCs that have a record of engaging in corrupt activities or human rights abuses. The UK should also encourage the Intergovernmental Working Group to incorporate a broader definition of PMSCs to include intelligence and cybersecurity activities.

5. EVIDENCE IN RESPONSE TO THE COMMITTEE’S QUESTIONS

What is known about the Wagner Group’s operations, including its size, recruitment process, countries of operation (past, current and potential) and the nature of its partnerships with ‘host states’? 

5.1  The activities of the Wagner Group in Ukraine, in many countries in Africa, and other parts of the world are increasingly alarming. Ostensibly private Russian entities like the Wagner Group support the Kremlin’s proxies and clients all over the world, even directly engaging in combat against US troops in Syria.[7] Wagner-affiliated contractors are engaged in Russia’s violent invasion of Ukraine.[8] They also operated or are currently operating in at least 18 countries in Africa, including Mali, Central Africa Republic, Libya, and Sudan.[9] Many of these operations appear to be motivated by mineral wealth and have generated reports of egregious human rights violations. In Libya, Wagner operatives reportedly ”plant[ed] explosive booby traps in residential areas and comit[ted] summary executions in support of a warlord vying for control of the country.”[10] Wagner Group appears to have focused on seizing and controlling Libyan oil infrastructure, and it is accused by the UN of committing war crimes.[11]

5.2  Wagner operatives allegedly teamed up with Sudanese soldiers to violently suppress anti-regime protests in exchange for gold mining rights.[12] In 2020, the US Defense Intelligence Agency assessed that the UAE provided financing for Wagner Group operations in Libya to support Haftar-aligned forces.[13]

What other Private Military Companies (PMCs) have links to states that may be hostile to the United Kingdom’s values and interests (including Russia and China)? What is known about these PMCs’ operations and how they are regulated/used by sponsor states?

5.3  China is home to one of the fastest growing PMSC industries in the world, and some Chinese-owned PMSCs have engaged in questionable activities. Chinese PMSC sales are projected to triple from US$13 billion in 2020 to nearly US$39 billion in 2030.[14] Since 2010, Chinese PMSCs have operated in Africa, first to protect its maritime vessels from pirates and now to support its Belt and Road Initiative (BRI).[15] Some of the prominent PMSCs include China Security and Protection Group, HuaXin Zhong ,Beijing DeWe Security Services Limited Company, Frontier Services Group, and China Overseas Security Group. Chinese PMSCs such as Beijing DeWe Security Service protect railways in Kenya and natural gas projects in Ethiopia and Djibouti.[16] Chinese PMSCs are also active in Sudan.[17] Chinese citizens have also reportedly been arrested in Zambia for “illegally training local military forces in military tactics.“[18]

5.4  Some of the United Arab Emirates PMSCs that employ British, American, and Australian citizens have allegedly engaged in questionable activities or have connections to other Emirati entities with similar concerns. One employee of the company Knowledge International reportedly played a role in UAE’s combat activities in Yemen, including a potential role in a helicopter attack the United Nations said targeted innocent civilians.[19] Knowledge International is a US sister company of the Emirati PMSC Knowledge Point, which regularly embeds citizens from the United Kingdom, France, and Spain, in the UAE’s armed forces.[20] The current president of Knowledge Point was the former CEO of the Emirati PMSC International Golden Group (IGG),[21] which employs Australian, British, French, Spanish, Italian, and US citizens.[22] IGG has contracted out Maximus Air Cargo.[23] An interview with a British employee indicates Maximus has flown supply missions to Yemen.[24]  Maximus aircraft have also been reportedly flown supply missions to Ethiopia and Eritrea under questionable circumstances.[25] As a result, British citizens working for Emirati PMSCs (as well as US PMSCs) may support controversial UAE foreign interventions in places such as Yemen, Libya, and eastern Africa (including Somalia).

5.5  Several large British and American PMSCs have subsidiaries in countries that pose risks to UK values and interests. The largest PMSC in the world in terms of annual revenue is G4S,[26] headquartered in the UK with subsidiaries all over the world, including eight in China and two in Hong Kong.[27] The American company Booz Allen Hamilton, a management consulting firm specialising in intelligence, defence, and cybersecurity, has subsidiaries in ten countries, including the United Kingdom, UAE, Egypt, Lebanon, and Saudi Arabia.  Similarly, DynCorp has subsidiaries in the United Kingdom, UAE, Egypt, and Saudi Arabia.  Booz Allen Hamilton and DynCorp have scored limited or low in their commitments to transparency and anti-corruption, according to TI-DS’s Defence Companies Index (DCI).[28]  

How effectively do international law and UK national law govern and police the activities of PMCs? Does the existing ‘rules-based international order’ provide a response? Are updates required?  

5.6  The international community generally opposes the use of mercenaries in armed conflicts. The foundational documents in international law are Article 47 of the 1977 Protocol I Additional to the Geneva Conventions (part of International Humanitarian Law, or IHL) and the 1989 International Convention against the Recruitment, Use, Financing and the Training of Mercenaries (also known as the UN Mercenary Convention). While IHL does not explicitly ban the use of mercenaries, it defines their status as persons who are not entitled to the rights of combatants, such as those afforded to prisoners of war. The UN Mercenary Convention, on the other hand, bans the recruitment, training, use, and financing of mercenaries by signatory states. This document importantly covers situations outside of armed conflicts, such as using mercenaries to overthrow elected governments. Although the UK along with other key states never formally ratified the UN Mercenary Convention, these documents form the normative basis for subsequent international efforts to regulate PMSCs, which include:

         The Montreux Document, produced in 2008, as a result of an initiative led by the Swiss Government and the International Committee of the Red Cross (ICRC). The UK has agreed to this non-binding agreement, which establishes good practices for countries that host and contract PMSCs. These include ensuring that countries do not hire PMSCs that have a record of engaging in bribery and corruption. There are only 58 countries that have agreed to the international accreditation standards established in the Montreux Document.
 

         The International Code of Conduct for Private Security Service Providers sets out principles of conduct that participating PMSCs must abide by. The standards are similar to the Montreux Document. The International Code of Conduct Association (ICoCA) performs audits to ensure its members and affiliate companies comply with the Code.  

         The UN Working Group on the Use of Mercenaries (UNWG) is a group of independent experts under the Office of the High Commissioner on Human Rights (OHCHR) mandated to monitor mercenaries and mercenary-related activities. The UNWG monitors and studies PMSC activities, reports on relevant human rights abuses and humanitarian law violations, and communicates with relevant government and PMSC actors.
 

         The United Nations Intergovernmental Working Group on PMSCs acts as the official forum and dialogue process for states on the norms of PMSC use. This working group is in the early stages of drafting a new international agreement that would establish common principles for regulating international PMSC use.

         The United Nations’ Guiding Principles on Business and Human Rights[29] outline the duties of states to protect against human rights abuse by third parties, including business enterprises, and to exercise adequate oversight in order to meet their international human rights obligations when they contract with, or legislate for, business enterprises to provide services that may impact upon the enjoyment of human rights within their jurisdiction. It gives guidance on the responsibilities of business enterprises to respect and protect human rights, highlights the need to enforce Anti-Bribery laws, and asserts the need to ensure access to remedy is not prevented by corruption.
 

5.7  In practice, several weaknesses undermine the effectiveness of this international framework. Key states like the UK, the United States, Russia, and China have never ratified the UN Mercenary Convention, greatly limiting its influence.[30] The Montreux Document has 58 participating states, but ICoC only has seven. This stagnation of ICoC buy-in, combined with the lack of funding streams for this type of activity, has led to a funding shortfall that severely restricts the body’s ability to monitor PMSC activities and detect abuses.[31] Meanwhile, the standards in the Montreux Document and ICoC struggle to meet the modern PMSC industry’s rapid proliferation and diversification of activities and contexts. For example, the scope of the Montreux Document only applies to armed conflict situations, despite serious concerns about PMSCS activities in non-conflict countries. The Montreux Document also excludes some surveillance and offensive services. Most of the companies that have agreed to ICoC are from the United States and Europe. Both the Montreux Document and ICoC exclude key corruption risks such as kickbacks and collusive bidding for contracts. As a result, the international framework for overseeing PMSCs is a patchwork of agreements that does not effectively address the critical risks associated with PMSCs.  The United Nations is seeking to address these gaps through a new international framework.

Generally, how do the activities of PMCs challenge the ‘rules-based international order’?

5.8  Many PMSCs operate in countries with weak defence sector institutions and a culture of secrecy around national security issues, all of which provide a fertile environment for corruption to thrive. There are also serious regulatory and transparency gaps in national oversight of companies and persons engaging in PMSC services. In particular, PMSCs run the risk of fuelling corruption and/or conflict in the following ways:

         Serving as an advisor to a foreign military or police force unit that procures services for PMSC activities;

         Inflating threat perceptions or security needs in order to secure or prolong contracts, which can encourage authorities to take unnecessarily aggressive action;

         Improving the coercive capabilities of foreign military and security forces in highly corrupt governments, which can intensify repression and strengthen foreign military actions;

         Partnering with foreign government officials who also own private companies providing PMSC services;

         Capturing valuable natural resources, which can drive violent resource competition among local or foreign actors;

         Pushing foreign companies to pay kickbacks to a national PMSC to receive government-funded contracts;

         Paying bribes to officials to influence government decisions or actions, which can inflame corruption dynamics that weaken and undermine state institutions;

         Brokering the sale of foreign PMSCs to fight on behalf of a foreign government in a conflict zone;

         Supporting or strengthening private, local organizations that feed into sectarian or criminal violence; and,

         Engaging in illicit economies such as arms trafficking.

For more detail on these risks, case studies and further evidence, see our recent report, Hidden Costs.

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27th September 2022