Arms trade and democracy: Sweden’s new criteria for export controls

A new draft bill in Sweden to introduce a ‘democracy criterion’ for granting arms-export licences would make the export of any materiel to the Gulf states more difficult and limit market access for Sweden’s defence industry.

Gripen air fighter

By Lucie Béraud-Sudreau, Research Fellow for Defence Economics and Procurement

On 29 June, the Swedish government submitted a draft bill to tighten arms export controls, which introduced ‘democracy criterion’ into Sweden’s arms-export legislation. The draft bill, sent to the Council of Legislation – a body that reviews bills before they are debated in Parliament – means that the democratic credentials of recipient countries would be taken into account for an export licence to be authorised. If adopted by parliament, the new legislation could, however, further limit the country’s weapons manufacturers’ market access, including to the Gulf region, when it comes into effect in 2018.

At face value, this would make the export of any military equipment to the Gulf states more difficult. No Gulf Cooperation Council countries featured in the top 100 states in the 2016 Economist Intelligence Unit’s Democracy Index. ‘The lower the democratic status’, according to the Swedish government, ‘the less scope there will be for granting a licence’. The Gulf is, for Sweden, a low-key but nonetheless lucrative market. Swedish defence-aerospace manufacturer Saab has been successful in the region with airborne early warning (AEW) systems, including a US$1.27 billion 2015 deal for two GlobalEye AEW and multi-role surveillance aircraft for the United Arab Emirates (UAE).

The government’s proposal also suggests financial penalties in case of violations, and additional transparency measures. The democracy criterion is, however, the most important aspect of the proposed legislation, not only because it has attracted the most attention in the Swedish debate, but also because of its novelty. If adopted, Sweden will be the first country to introduce this type of strict arms-export-control regulation.

Specifically, the text as it stands stipulates that respect for human rights and the democratic status of the recipient state will become ‘central conditions’ in the licensing process. Serious and extensive violations of human rights or ‘grave deficiencies’ in democratic status will constitute an obstacle for granting a licence. The worse the democratic status, the less scope there will be to authorise an export. The assessment of client states’ ‘democratic status’ will be based on the presence of democratic institutions; the possibility to freely form opinions; and the state’s respect for fundamental democratic principles.

This proposal is the outcome of much debate and a long political and legislative process in Sweden. The introduction of a democracy criterion has been regularly mentioned since the early 2000s. In 2005, it was not pursued by a legislative review of arms-export controls (Krigsmateriel Utredningen, or KRUT), and the topic dropped off the agenda for a time. After the Arab Spring however, the issue resurfaced following NGO campaigns. The Swedish parliament first requested that the government change the regulations in May 2011. The government responded a year later, in June 2012, proposing a new legislative inquiry called KEX (Krigsmaterielexportöversynskommittén). This came after renewed pressure from civil-society organisations following a scandal over contracts, related to the planned construction of military facilities, between Sweden’s defence authorities and Saudi Arabia.

The KEX committee released its report in June 2015 – after the deadline had twice been postponed. Over 1000-pages long, the report included proposals on a democracy criterion, now part of the government’s draft bill.

Sweden’s defence industry relies on exports for up to 54% of its revenue. Moreover, it is highly internationalised, with companies like Hagglunds and Bofors part of BAE Systems, and Saab itself having worldwide operations. The new export-control guidelines, if adopted, could potentially impair elements of the Swedish industry’s ongoing international cooperation or arms-export negotiations. Furthermore, another key feature of the new regulation covers ‘follow-on deliveries’ (följdleveranser), which include spare parts or ammunition for previously supplied military equipment, and other deliveries directly related to previously granted licences. Although there is a positive presumption for granting licences for such follow-on deliveries, they will still be judged on a case-by-case basis, i.e. they could be stopped if the democratic status of the client state is assessed as having deteriorated.

As well as existing business with the UAE, contracts that could be affected include cooperation with Thailand on the Gripen combat aircraft and Erieye AEW system.

The new arms-export control rules, if adopted by parliament, will send a strong signal within Sweden’s domestic political debate, notably fulfilling a long-lasting demand from NGOs. The introduction of the ‘democracy criterion’ will likely reinforce the ability of civil-society organisations and political actors to exercise strict oversight of the export licences granted to defence companies. Nonetheless, as is formulated in the current draft, the democracy criterion remains open to interpretation. Notably, the new ‘democratic status’ aspect that is to be taken into account when assessing export licences is worded as a conditional, not absolute, ban on exports. This provides the Swedish export-control agency, the Inspectorate of Strategic Products (Inspektionen för strategiska produkter, or ISP) with some leeway to deliver arms-export licences even if potential client states are not models of democracy.

This analysis originally featured on the Military Balance+, the new IISS online database that enables users in government, the armed forces and the private sector, as well as academia and the media, to make faster and better-informed decisions. The Military Balance+ allows users to customise, view, compare and download data instantly, anywhere, anytime.

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