Select Committee on Defence Appendices to the Minutes of Evidence


Memorandum from Rolls-Royce (6 December 2000)

  Attached is a short paper summarising our views and comments on the Framework Agreement treaty. Overall, we judge the Agreement to be a positive first-step towards achievement of the principles set-out in the 1997 Letter of Intent regarding harmonisation of activity and removal of obstacles to the creation of a competitive and efficient market place.

  The one note of particular caution that we would sound and which is, we believe, shared by much of UK industry, concerns the compatibility of aspects of the Agreement with the US Declaration of Principles and Defence Trade Security Initiative. We do not believe that this is a question that Industry can answer but it is a dimension on which we judge a dialogue between Government and Industry to be needed.


  1.  Rolls-Royce welcomes the Framework Agreement as representing a significant step in the process of integrating the European Defence Market. Its particular importance lies in the recognition that integration on the "customer" side is pre-requisite to achieving an industrial structure which will deliver real benefits to the customer.

  2.  Rolls-Royce has considerable experience of collaborative defence programmes and, historically, these have suffered, especially in their formative stages, from difficulties in reconciling the operational and administrative requirements of the participants. The Framework Agreement will facilitate the removal of many of the obstacles to future collaborative projects and will permit the pursuit of harmonisation.

  3.  Taken in conjunction with the establishment of OCCAR, this Framework Agreement also provides a basis for a more efficient exchange of ideas concerning the establishment of joint programmes and for their subsequent execution. However, we would have preferred to see a stronger commitment within the Agreement to consultation with industry as, in our view, the Agreement is very much a first-steps document and much work remains to be done in order to implement its provisions.

  4.  Taking the specific points covered by the Agreement, Rolls-Royce's comments are:

Security of Supply

  The arrangements proposed are a pre-requisite if centres of competence are to be developed on a European scale and the acknowledgement that companies will use their commercial judgement in order to achieve this is welcome. How "National Security" would be defined in a situation where a country wishes to preserve a capability that industrial logic might dictate should be concentrated elsewhere, will clearly be an important issue. Rolls-Royce would clearly be concerned if competitors were to be protected in the interests of National Security and thus enabled to address export markets more aggressively than might otherwise be the case. In the final analysis, the preparedness of governments to open up their defence industry markets will largely determine whether the Agreement achieves its objectives.

Transfer and Exports Procedures

  It is not clear how the initial establishment of a list of permitted export destinations will work. The text appears to imply that the list will be the "lowest common denominator" of all of the participating Nations' current policies: this would be detrimental to both UK and Rolls-Royce interests. The aim must surely be to develop a simplified export control regime for transfers between participating nations. Adoption of the proposals previously submitted through EDIG for export responsibility to be allocated to a "lead nation" would be a significant step forward in terms of progressing the issue of exports outside of the six nations.

Security of Classified Information

  The Agreement lists a number of reforms which will prove to be of considerable benefit in removing security-related obstacles. However, the value of these measures will not become apparent until they are implemented in a consistent manner in all participating counties. There is a great deal of procedural detail within Section 4 and the Security Annex, which could easily become a bureaucratic "man-trap"; security is now frequently perceived as an obstacle to communication and it will require sustained effort and determination on the part of all participating nations to improve this situation.

Defence-Related Research and Technology

  This Article needs further development. Rolls-Royce welcomes both the commitment to developing a common understanding of what technologies are needed and to the renunciation of programme-specific "juste-retour" requirements; though how "global return" will work in practice remains unclear.

  Much of the R&T in propulsion technology results in "dual-use" technology, applicable within Commercial as well as Defence markets; the protection of companies' commercial interests will therefore need to be taken into account in any trans-national R&T programmes. There are already precedents which demonstrate that this is not an insurmountable obstacle—for example, the EU-sponsored research into environmentally friendly commercial engines being undertaken jointly by, inter alia, Rolls-Royce and SNECMA.

Treatment of Technical Information

  The principles laid down in the Agreement represent a useful starting point to the process of agreeing common standards of treatment. However, in the area too there remains much detailed work to be done in order to resolve a number of issues and concerns, for example:

    (a)  standardisation of IP Terms and Conditions—necessary for proper implementation of Article 32;

    (b)  our belief that parties should recognise and honour the pre-existing rights of contractors—Article 40 seems to imply non-recognition;

    (c)  agreement on harmonisation conditions that are not unduly onerous—Article 42.

Harmonisation of Military Requirements

  Strong political commitment to this principle is essential for progress. Overall, Rolls-Royce supports the provisions as laid down, in particular the commitment for a dialogue with industry.

Protection of Commercially Sensitive information

  The crucial point, recognised in these provisions, is that such information has both a commercial value and a market sensitivity. The arrangements for protecting such information are likely to be complex and detailed and the development of existing standards (eg the NATO Agreement on the Communication of Technical Information) would assist in both the development and understanding of an appropriate regime.

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