Minutes of DTI Meeting, London
REPORT ON MEETING WITH DTI LONDON
6 September 1985
Ayling (Under Secretary- Legal)
Vollmer, Legal Counsel
The meeting opened with Hall asking what was meant by "installed and tested to buyers instructions" in the contract BEPA had secured with Machinoimport.
Metcalf replied that the furnaces in general in USSR are more or less complete including drawings, manuals etc. but excluding internals for low temperature plus the equipment at Hull Docks. The high temperature line furnaces are installed with internals. He stated that the client has spent approximately 8 million and now has the responsibility of making the equipment valuable, i.e. operational.
Hall said that their understanding was BEPA was going to make the equipment into a functioning installation, that is the purpose of the BEPA contract.
Metcalf stated that we had supplied the equipment and since this met operational conditions, i.e. 1000 degrees C. or 1200 degrees C, then we had satisfied the clients the furnaces can heat anything. He said he was confident that this is not a high risk security contract.
Hall then asked Metcalf if he knew what the end product would be and Metcalf replied that he did not know.
Hall asked Metcalf if after completing the BEPA contract would the equipment be capable of doing the same job of work as if the Consarc/Machino contract had not been frustrated.
Metcalf replied in the negative as he was unable to complete the isopress since he did not know how to make them work and had never stood beside an operational isopress. Metcalf said he does not believe that he will complete the isopress in Bellshill and even if he did he would still not be able to use its capability anyway.
Hall replied that the BEPA contract in Clause 1 clearly includes isopresses.
Metcalf declared that he would put everything on the table. A BEPA order had been put on Stansted Fluid Power to start up the isopress as far as their part is concerned. Consarc was also asked not to ship the cold bottoms and of course it had adhered to this request. Stansted had an obligation to start up the pumps and make the equipment safe.
Hall advised that our Governments are concerned with this contract since it puts this equipment into operation to the same standard as before the law was changed. This makes this contract subject to concern since it also obstructs our national interest.
Metcalf explained all the previous installations, e.g. 30 ton VIM, in the Soviet Union and that they are of a more strategic nature than the isopress and high temperature furnaces.
Metcalf declared that he now knows the sensitivity of the isopresses but he does not know the sensitivity of the furnaces. The Japanese, for example, are taking orders from us for this type of equipment and the end product which we believe is similar to Calcarb.
Metcalf explained that some months ago he went to the American Government to get a ruling that would hopefully stop him from going to the USSR to work on this project.
The reply however surprised him as it indicated that he could proceed.
Hall asked for a copy of this letter (Department of Commerce dated 8 July) from the U. S. Government. The available correspondence was given to Ayling with a promise from Metcalf that all other relevant letters from the American Government would be handed over.
Ayling asked if the American Government had a copy of the BEPA contract and Metcalf replied that they did not but that he had asked Vollmer to pass a copy of the contract to the Department of Commerce.
Ayling questioned Metcalf about the relationship between BEPA and Consarc and what his position was with Consarc.
Metcalf explained both the relationship between BEPA and Consarc and also his position.
Metcalf, when asked if he had established this contract with Consarc's consent replied that he had not but explained why BEPA was formed.
Ayling asked did we not realize that this frustrated contract was of deep concern to the Government and for reasons of national security it should never be completed.
Wilson replied that since the 8th of February Consarc had repeatedly asked for instructions in writing that would stop Consarc from having to send engineers to Moscow. It was also pointed out that it was Consarc that withdrew their engineers from Moscow and not at the request of the DTI or other Government officials and, had they not done so, the contract could have been further along the road to completion. Wilson also explained that we had kept the DTI fully informed about the constant request from the Buyer to send out engineers and about their statement that "a contract is a contract" and that we had to fulfill our obligations to the Buyer and his client, otherwise we would suffer the consequences.
Metcalf reminded the DTI that previous communications from Government departments had made it clear that the Government was unable to advise Consarc as to how it should proceed in relation to the unfulfilled parts of its contract with Machino, and that Consarc had been told to use its "best commercial judgment" and decide for itself.
Although there was no reply from Hall he did acknowledge the above by a nodding gesture.
Ayling then asked Wilson what his connection was with BEPA and if Consarc was required to send engineers out to USSR, to which he replied that he had no connection with BEPA and that Consarc was not required to send engineers.
Ayling then asked why Wilson was attending the meeting with BEPA. It was pointed out that it was connected with Consarc and other Consarc business.
Ayling indicated that Wilson should not be replying on behalf of BEPA but when Wilson asked if he should leave the meeting Hall stated that he should stay.
When Ayling asked if the BEPA contract was binding to complete this installation, Metcalf replied that BEPA requires to complete the installation unless instructed not to do so. Ayling then asked if he would stop if he was told to do so and Metcalf stated that he would if the instruction was given in writing and he would write to the client direct to inform him that we were unable to complete the installation.
Ayling asked Metcalf if he had obtained legal counsel and when he replied that he had not Ayling then asked Vollmer if he had looked at the contract, to which Vollmer responded that he had just briefly, as he had only received sight of the contract that morning.
Ayling asked Metcalf if he realized that the contract and its implication is a security risk.
Hall again expressed concern about Clause 1 of the BEPA contract which states that testing is to buyer's instructions.
Metcalf declared that he did not intend to break the law, would not test the equipment above 2000 degrees C and would not test isopresses with heaters and the law must be obeyed.
The DTI asked for a short recess to confer privately.
On reconvening the meeting Hall said they had listened very carefully to what had been said and he advised the DTI position at this time. They had nothing to say but requested the following:
- A written statement from BEPA as to what it proposed to do on site in USSR.
- The matter must be discussed with other Government departments and the BEPA written statement would be circulated to these departments.
- Governments are very concerned and the written BEPA statement is necessary before any final decision can be taken.
Metcalf stated that the first step he would undertake on Monday next in Moscow, would be to have the programme written up. This programme will become a contract amendment and a copy will be passed to DTI for their records.
Ayling asked Metcalf if he was going to the USSR without consultation and without advice from Department of Commerce to which Metcalf affirmed he was.
Ayling replied that this looked foolish and indicated the type of person he is.
Metcalf responded that "a peddler is a peddler" and that he intended going to the USSR under the contract to carry out the first step and report back to DTI.
Ayling repeated that this was very foolish since counsel had not advised him and then asked how Metcalf could be contacted during his visit to the USSR. When told through Wilson at Consarc, Ayling was not satisfied and it was decided Metcalf should be contacted through the USSR/USA Trade Center.
Ayling left the meeting.