Memorandum Submitted by the Ministry of
Defence (1 December 2000)
1. On 6 July 1998 the Defence Ministers
of France, Germany, Italy, Spain, Sweden and the United Kingdom
signed a Letter of Intent (LoI) designed to facilitate defence
industry restructuring in Europe. The LoI set up six working groups
to examine the main areas where government was committed to identifying
proposals to remove some of the barriers to restructuring.
2. A Framework Agreement signed on 27 July
2000 at the Farnborough Air Show consolidates the results of these
working groups, and will establish practical measures which respond
to concerns that have been expressed by both government and industry.
The Agreement builds on the principles set out in the LoI and
will pave the way for more effective defence equipment and industrial
co-operation in Europe.
3. The "Framework Agreement" is
so named because it literally creates a legal framework in international
law within which the six governments may co-operate. This is not
just a matter of organisation: agreement is required on the principles
and policies that will govern co-operation between the six nations.
The Agreement sets out specific measures in each of the six key
areas: security of supply; export procedures; security of classified
information; treatment of technical information; research and
technology; and harmonisation of military requirements. It also
initiates work to develop further measures to enhance co-operation,
which will be recorded in subsidiary arrangements under the Agreement.
4. European defence companies must remain
competitive in the world market to ensure their survival and commercial
well being. Without consolidation and rationalisation our relative
competitiveness will suffer and export markets will be lost. Much
has been achieved already. BAE SYSTEMS, itself a product of the
former BAe and GEC-Marconi, has extensive cross-border links in
Europe, such as its joint venturesMatra BAE Dynamics, Alenia
Marconi Systems and Thomson Marconi Sonarand its investments
in Saab and STN Atlas Electronik. Other major examples of such
consolidation are the formation of the European Aerospace &
Defence Systems company and the acquisition of Racal by the French
Company Thomson-CSF. But much scope for restructuring remains.
5. It is not the role of government to prescribe
the form of the new companies, alliances and joint ventures that
emerge from this processalthough we are not a disinterested
party. It is primarily for industry to decide what organisation
is required for commercial success. Governments can assist the
process, however, by removing obstacles that could hinder industry's
efforts to restructure and co-operate. This Agreement represents
the commitment of the six governments to smooth the path towards
a restructured and correspondingly stronger European defence industry.
6. Against a background of limited defence
resources all six LoI governments recognise the need to co-operate
in the procurement field if they are to fulfil their equipment
aspirations. The measures contained in this Agreement are designed
to ensure that when we co-operate with our partners, we will do
so more efficiently and effectively, and that many of the obstacles
which previously hindered Government-to-Government co-operation
will be removed.
7. Security of Supply. It is increasingly
evident that a national industrial base which supplies the full
range of defence products is no longer sustainable. So, although
there are no strategic concerns about transfers of military goods
and technology between the six LoI governments for their own use,
governments need confidence that security of supply will be effective,
not just in present circumstances, but in a wide range of future
contingencies. Accordingly, this Agreement commits the governments
to work together to ensure that the new industrial environment
does not prejudice national security interests. The six governments
recognise that this is an area where they will have to use the
Agreement to broaden and deepen existing arrangements for achieving
assurance of supply.
8. Security of Classified Information. The
Agreement will introduce new simplified security provisions for
exchanges of classified information between governments or their
defence industries, which nevertheless maintain the security of
that information, even when industry is restructuring across national
9. Export Procedures. Defence exports are
important for the maintenance of a strong and competitive European
defence industry, and ensure that national requirements can be
met more economically from extended production runs. The Agreement
commits participating governments to introduce simplified arrangements
and procedures for export licensing, and for transit documentation
approved by participating governments. The proposed arrangements
will not dilute existing national export controls and exports
will continue to be conducted within the ambit of the EU Code
of Conduct on Arms Exports. The MoD is confident that the new
arrangements will benefit industry considerably, both in terms
of assurance of supply, and reduced bureaucracy. For example,
the Global Project Licences will govern transfers between Parties
in the context of approved co-operative programmes, meaning that
companies will not require separate licences for individual transfers
associated with such programmes.
10. Research & Technology. There is
wasteful duplication of research funding in Europe. The Agreement
tackles this by fostering co-ordination of joint activities to
increase the advanced knowledge base and thus encourage technological
development and innovation. It builds on experience gained in
existing European multilateral research and technology fora and
seeks, inter alia, to create a climate in which nations can establish
projects more quickly and efficiently than at present.
11. Treatment of Technical Information.
Excessive restrictions on the movement of technical information
between governments and their defence industries can reduce the
potential to advance the knowledge base and can inhibit innovation
and the development of new products. This Agreement tackles this
by establishing clear principles for the disclosure, transfer,
use and ownership of technical information.
12. Harmonisation of Military Requirements.
The Agreement commits the countries to further work on improving
the harmonisation of military requirementsan essential
prerequisite to better equipment co-operation. A key aim will
be to start the process earlier through co-operative equipment
planning, and identification and formulation of common military
requirements rather than to attempt to harmonise already mature
13. MoD is committed to press ahead with
the detailed implementation of the measures under the Agreement,
which is consistent with our aim of improving equipment and industrial
co-operation in Europe. Answers to the Committee's specific questions
on the framework Agreement are attached at Annex A.