12. EUROPEAN SECURITY AND DEFENCE POLICY:
FINANCING OF OPERATIONS
(24182)
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(a) Unofficial Presidency text of a draft Council Decision implementing Joint Action establishing an operational Fund to provide for the financing of the shared costs of operation ALPHA.
(b) Unofficial Presidency text of a draft Council Decision concerning the financing of operation ALPHA.
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| Legal base: | Article 28 EU; unanimity
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| Department: | Foreign and Commonwealth Office
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| Basis of consideration: | Minister's letter of 16 January 2003 and EM of 15 January 2003
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| Previous Committee Report: | None; but see (23537) —: HC 152-xxxvii (2001-02), paragraph 18 (17 July 2002)
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| To be discussed in Council: | 27 January 2003 General Affairs and External Relations Council
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| Committee's assessment: | Politically important
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| Committee's decision: | Cleared, but further information requested
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Background
12.1 Article 28 of the Treaty on European Union sets
out the general principles for financing EU-led crisis management
operations. Administrative expenditure is to be charged to the
EC budget, as is operational expenditure "except for such
expenditure arising from operations having military or defence
implications". The second paragraph of Article 28(3) provides
that where expenditure is not charged to the EC budget "it
shall be charged to the Member States in accordance with the gross
national product scale".
12.2 An overall framework for financing European Security
and Defence Policy (ESDP) operations with military or defence
implications, which we cleared on 3 July 2002,[28]
stated that most costs would be funded on a costs-lie-where-they-fall
basis. However, a limited number would be funded as "common
costs". These were defined in the annex. The document made
it clear that the common costs would only include additional or
incremental costs arising from the operation. Staff salaries,
for instance, would not be eligible.
12.3 A third component would be the costs of transport,
barracks and lodging for the forces. Agreement had proved elusive
on what elements of the third component should be treated as common
costs. The document was presented by the Council as providing
an interim solution and it acknowledged that more work was needed.
The two options
12.4 Since June, discussions have taken place to find
a more precise definition of the common costs. In his letter of
16 January 2003, the Minister for Europe, Mr Denis MacShane, recalls
that he sent us an update on the progress of these discussions
on 22 November.[29] He
says that, following agreement at the Copenhagen European Council
in December on "Berlin Plus" (arrangements between the
EU and NATO), discussion on ESDP financing has progressed much
more quickly than expected. Agreement has almost been reached
on the texts of the two financing options to which he referred
in November and in a further letter of 12 December.[30]
Both the drafts, in the versions which we consider here, will
be discussed in committee in Brussels with a view to approval
on 27 January by the General Affairs and External Relations Council
(GAERC). One of these options will be chosen, on a case-by-case
basis, when the Council Decision to launch an operation is ready
to be adopted. They provide for:
- Option 1 — the establishment of an operational
fund for financing the shared costs of an operation. This is described
by the Minister as the mechanism option; and
- Option 2 — post-operation settlement of costs.
Contributing states would initially cover expenditure on a costs-lie-where-they-fall
basis.
Option 1 — the mechanism option
12.5 When a Council Decision has been taken to launch
an operation,[31] a further
Council Decision, the draft of which is at document (a), would
set up an operational fund, managed by an administrator. This
would have the necessary legal capacity to open and hold a bank
account and dispose of property. The administrator would be appointed
by the Secretary General/High Representative.
12.6 A detailed budget would be drawn up by the administrator.
When drawing up the "expenditure" section, he would
act on a proposal from the operation commander who, like the administrator,
would be appointed by the Secretary-General/High Representative.
Initial funding requests would then be sent to all "contributing
states". Exactly how third countries would contribute has
yet to be finalised, but the Minister says that agreement in principle
has been reached that third countries associated with the Joint
Action on participation will contribute to the common costs. A
Special Committee of contributors, chaired by a representative
of the Presidency, would agree the budget by unanimity, monitor
the management of the fund, and determine whether specific items
are eligible for payment from the Fund as common costs.
Option 2 — the post-operation settlement option
12.7 If this option is chosen, the contributing states
would initially cover expenditure on a costs-lie-where-they-fall
basis. The Member States listed in an Annex to the Decision—"the
States responsible for pre-financing"— would bear the
common costs, provisionally. They would be expected to observe
the rules of sound financial management, and in particular those
of economy and cost-effectiveness, and of generally accepted accounting
practices. The contributing states would subsequently reimburse
them. During the pre-financing period, a State responsible for
pre-financing could submit an estimate of expenditure, for which
it might later request reimbursement, to the Special Committee
for its opinion. This opinion would not prejudge the final decision
of the Special Committee.
12.8 At the end of the operation, the contributing states
would inform the Framework Nation, the one which provides the
Headquarters of the operation, of expenditure which they consider
to be eligible as common costs.
"The Framework Nation would then produce a draft statement
of expenditure which would have to be approved unanimously by
a Special Committee. Arrangements for third countries would be
similar to those under the 'mechanism' option. There would then
be a call for financial contributions, which would be paid into
an account nominated by the Framework Nation. The Framework Nation
would duly reimburse contributing states as appropriate".
The Government's view
12.9 The Minister says that he expects the proposals
to be endorsed by the Council on 27 January. He recalls that the
basis for the ESDP is the Prime Minister's St Malo Initiative.
He adds:
"The Copenhagen European Council in December 2002 stated
the EU's readiness to take over the military operation in Former
Yugoslav Republic of Macedonia (FYROM) as soon as possible, in
consultation with NATO. The EU will choose one option, from the
two texts presented here, for this mission. The UK endorses the
Presidency view that the 'mechanism' option is more likely to
be appropriate for a large ESDP military operation though the
post-operation settlement of costs option may be appropriate for
smaller, more urgent operations. The decision on which model to
use will be taken on a case-by-case basis as part of the decision
to launch a specific ESDP operation."
12.10 Addressing the financial implications of the proposals,
the Minister says that the UK share of the common costs, according
to the EU GNP key, will be approximately 18% in 2003:
"The cost to the UK will depend on the number of contributors
to the mission and the scale of the operation. But as a potentially
large contributor to the HQ element of an operation [the Government
does] not expect the arrangement to be financially disadvantageous
to the UK."
Conclusion
12.11 If the EU is to take over the military operation
in the Former Yugoslav Republic of Macedonia (FYROM) as soon as
possible, as agreed at the Copenhagen European Council in December,
it is important that the arrangements for financing ESDP operations
with military implications are established without delay.
12.12 Much progress has been made on working these
out in advance, and the complexity of the processes has not made
this an easy matter. However, there are still aspects which we
believe need clarification if they are not to give rise to difficulties,
particularly in the case of operations where urgent action is
required. We have in mind, for instance, the key role played by
the Presidency. The administrator and the operation commander
will act under its authority. What would happen if the Member
State holding the Presidency was not a participant in the operation?
Are we right to assume that this question would not arise if the
Union decides to abolish the rotating Presidency?
12.13 Also, agreement has not yet been reached on
exactly how third country contributors will slot in. The Minister
says in his Explanatory Memorandum that under the post-operation
settlement option, the contributing states would initially cover
the expenditure, but the text of the draft suggests in Article
1 that some Member States would be responsible for pre-financing
the operation and that the contributing states, which could include
third countries, would only reimburse them "thereafter".
12.14 We clear the document, but ask the Minister
to write to us again with copies of the texts endorsed by the
Council. We also ask him to comment on the points we have raised
here, on any difficulties which the Government foresees and on
whether further clarification of the legal texts might be required.
28 See
(23537) -; HC 152-xxxv (2001-02), paragraph 15 (3 July 2002);
(23537) -: HC 152-xxxii (2001-02), paragraph 21 (12 June 2002);
and (23537) -: HC 152-xxxvii (2001-02), paragraph 18 (17 July
2002) also refer. Back
29 Not
reported. Back
30 Not
reported. Back
31 This
is referred to in the draft as Operation ALPHA but it would be
given the name of the actual operation in any adopted Decision. Back
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