1 Global satellite navigation
system
| (a)
(25690)
—
—
(b)
(25715)
9941/04
SEC(04) 640
(c)
(25879)
11834/04
COM(04) 477
(d)
(26012)
13300/04
COM(04) 636
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Draft Joint Action on aspects of the operation of the European satellite radionavigation system affecting the security of the European Union
Draft Decision on the signature and provisional application of the agreement on the promotion, provision and use of Galileo and GPS satellite-based navigation systems and related applications
Draft Regulation on the implementation of the deployment and commercial operating phases of the European programme of satellite radionavigation
Commission Communication: moving to the deployment and operational phases of the European satellite radionavigation programme
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| Legal base | (a) Article 14 EU; —; unanimity
(b) Articles 133, 170 and 300(2) EC; unanimity (c)Articles 155(1) and 156 EC; co-decision; QMV
(d) —
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| Document originated | (d) 6 October 2004
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| Deposited in Parliament | (d) 13 October 2004
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| Department | (a) Foreign and Commonwealth Office
(b) to (d) Transport
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| Basis of consideration | (a) to (c) Minister's letter of 16 November 2004
(d) EM of 1 November 2004
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| Previous Committee Report | (a) and (b) HC 42-xxii (2003-04), para 12 (9 June 2004)
(c) HC 42-xxxi (2003-04), para 4 (15 September 2004)
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| To be discussed in Council | 9-10 December 2004
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| Committee's assessment | Politically important
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| Committee's decision | For debate in European Standing Committee A
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Background
1.1 The European Community has a two-phase policy for developing
a global navigation satellite system (GNSS). The first phase,
GNSS 1, is the European Geostationary Navigation Overlay System
(EGNOS) programme. The second phase, GNSS 2, is the programme,
named Galileo, to establish a new satellite navigation constellation
with appropriate ground infrastructure. It is based on the presumption
that Europe ought not to rely indefinitely on the GPS (the US
Global Positioning System) and GLONASS (the Russian Global Navigation
Satellite System), augmented by EGNOS. Galileo is being carried
out in conjunction with the European Space Agency (ESA).
1.2 Over the last five years we have reported to
the House on many aspects of the Galileo project, most recently
in June and September 2004.[1]
The matter has also been debated twice in European Standing Committee
A, the last occasion being 7 June 2004.[2]
1.3 The Galileo programme has four phases:
- the definition phase, which
ran from 1999 to 2001, during which system architecture was designed
and the services to be offered were decided;
- the development and validation phase, which runs
from 2002 to 2005 and covers development of the satellites and
the system's ground components, as well as validation in orbit.
This phase is under the management of the Galileo Joint Undertaking
(GJU), which has been set up for a period of four years;
- the deployment phase covering 2006 and 2007 —
building and launching of the satellites and establishment of
the entire ground-based component; and
- the commercial operating phase due to begin in
2008 — management of the system as well as its maintenance
and updating.
1.4 Regulation (EC) No. 1321/2004, adopted in July
2004, established a Galileo Supervisory Authority. The deployment
and operational phases of Galileo will be run under a public-private
partnership (PPP) concession under the control of the Supervisory
Authority. The authority:
- is a Community body with its
status modelled on that of a regulatory agency and with legal
personality;
- will conclude the concession contract with whichever
consortium is selected on completion of the Galileo development
phase, and ensure compliance by that consortium with that contract;
- will be responsible for managing and controlling
the use of the Community funds allocated to the programme; and
- will become, on completion of the development
phase, owner of the entire satellite radionavigation system, including
whatever may have been developed by the concessionaire, unless
the concession contract provides otherwise.
1.5 It has been agreed that the safety and security
aspects of Galileo should be dealt with outside the Regulation
establishing the Supervisory Authority, by means of second pillar[3]
Joint Actions. The draft Joint Action in document (a) sets out
the principles for ensuring that Members States' security concerns
are respected in the operation of Galileo. Although this document
is still under scrutiny, we stated that agreement need not be
withheld pending clearance, and the proposed Joint Action was
adopted in July 2004.[4]
A further draft Joint Action will be required to establish bodies
within the authority — a Security and Safety Board and a
Centre for Security and Safety — to be responsible for management
of the security and safety of the Galileo system.
1.6 Document (b) is a draft Decision to authorise
signature and provisional application of an agreement which has
emerged from negotiations with the US Government on the relationship
between the Galileo and GPS satellite-based navigation systems
and related applications. This agreement was signed in June 2004,
again following our decision that agreement need not be withheld
pending scrutiny clearance.[5]
1.7 Document (c) is related to the agreement that
the public-sector share of the costs of the deployment phase and
of the initial stages of the operational phase (while income streams
build up) should be no more than one-third. Indications from
the consortia bidding for the PPP concession are that this share
is achievable — provided that they have some guarantee of
income levels. The draft Regulation is intended to ensure that
the programme is adequately financed during its early years until
income streams have developed sufficiently to meet all operating
costs. It provides for €1,000 million (£675.49 million),
in a new line in the Community budget, to be used by the Supervisory
Authority to part-finance the deployment and operating phases
during the period 2007-2013.
1.8 When we considered this document in September
2004 we noted that, because of both the likelihood that negotiations
on the concession will continue into 2005 and the need to know
also the outcome of the Financial Perspective negotiations for
the period 2007-2013,[6]
this draft Regulation will not be ready for adoption for some
time to come. But we said that we had been concerned from time
to time about apparent precipitate decisions on the Galileo programme
and continued to be concerned about the danger of a slide towards
a commitment to excessive public sector participation in the costs
of the next phases of the programme. We expected that discussion
at the 9-10 December 2004 Transport Council would be significant
in regard to the future of Galileo. We asked the Government to
inform us, in sufficient time for us to consider the whole Galileo
matter fully again before that Council meeting, where matters
stood on:
- document (c);
- selection of a concessionaire;
- the transparency and the probable totality of
costs;
- negotiations with non-Member States about participation
in Galileo; and
- the Joint Action to establish a Security and
Safety Board and a Centre for Security and Safety.[7]
The new document
1.9 In its Communication in document (d) the Commission:
- recapitulates recent developments
in the Galileo programme;
- reports that the selection of a concession operator
is now well advanced under the management of the GJU, supervised
by Member States. Bids from two of the three shortlisted consortia
were lodged with the GJU on 1 September 2004. Negotiations continue
with a view to signing a contract with the successful consortium,
with the Council's approval, by the end of 2005. (In view of
the continuing negotiations the GJU has requested that Member
States treat any commercially-sensitive documents about the merits
of the bids in the strictest confidence);
- repeats its proposal for a draft Regulation on
financing the programme during its early years (document (c));
and
- discusses the need to reach an agreement on the
services that will be offered by the Galileo system, to confirm
for the PPP concession holder what Member States will expect them
to provide.
1.10 The Commission concludes:
"All the conditions are … met for the Council
to confirm:
- the irrevocable transition to the programme deployment
and operational phases;
- the essential features of the system, in particular
as regards services; and
- the commitment of the public authorities with
regard to the funding of the deployment and operational phases
and the monitoring of the system.
"Confirmation is necessary in order:
- to enable the Joint Undertaking to complete the
negotiation of the concession contract due to be signed in the
course of 2005; and
- to enable private-sector stakeholders to confirm
their bids and financial commitments."
The Government's view
1.11 The comments on policy by the Parliamentary
Under-Secretary of State, Department for Transport (Mr David Jamieson),
in his Explanatory Memorandum relate primarily to the new document
but also touch on the information we sought in September 2004.
He says:
"The Commission's proposal for public-sector
funding of the deployment and operation phases is intended to
ensure that the programme is adequately funded until it is able
to meet all costs from revenue. It has been drafted on the assumption
that the bids from the potential operators of the PPP concession
will provide the anticipated private sector funding of at least
2/3 of the deployment costs and an increasing proportion of the
operating costs that will rise to the full requirement by 2012.
However the financial assumptions underlying the Commission's
estimate of the costs should in our view be treated with extreme
caution and must be reviewed once better estimates emerge from
the final evaluation of the bids.
"The UK is clear that Council cannot take a
final view on the commercial viability of the system or commit
taxpayer's money without a clear picture of the value-added by
the project and a proper cost-benefit analysis. This will not
be possible until the final offer is on the table. It has also
made clear that no irrevocable commitments can be made until agreement
is reached on the new Financial Perspective for 2007-2013."
1.12 The Minister then repeats, almost word for word,
what we were told by the Government on document (c) about:
- its key aim for the Galileo
programme of ensuring the creation of an effective, value for
money, PPP for the deployment and operating phases; and
- the Government's intention to question the realism
of assumptions incorporated into the Commission's proposal for
the draft Regulation in document (c), particularly the timetable
for deployment and full operation of the system — which
the Government now expects to be between two and four years later
than the Commission's estimate of 2008.[8]
1.13 On the services that will be offered by the
Galileo system the Minister says:
"The UK's view on the services to be provided
by Galileo is that it will probably be necessary for all the five
services[9]
set out in the High Level Definition document for Galileo to be
provided in order that the concessionaire will be able to attract
sufficient income to meet their financial obligations under the
PPP contract. This is confirmed by the GJU's initial analysis
of the concession bids which indicates that the following income
streams are anticipated by the bidder:
"In view of this, we have agreed to drop our
initial opposition to the PRS,[10]
since to maintain a hard line against it would be likely to seriously
prejudice the viability of the PPP, the successful outcome to
which has always been one of our key objectives. In doing so,
however, we will make every effort to ensure that there are sufficient
safeguards in place to prevent any 'creep' towards the use of
the PRS for specific military applications since we view this
as contrary to the explicit civil nature of Galileo and outside
the competence of Transport Council. We will therefore ensure
that sufficiently robust checks and controls on access to the
PRS signal, on future decisions over its development, and on requirements
in the PPP contract, are written into the Transport Council agreement
on the PRS. This should include an explicit requirement that
any move towards military applications must be referred to an
appropriate, Pillar II,[11]
forum. We will be engaging in lobbying partners to secure these
objectives or to join a blocking minority in Council if we fail
to secure the restrictions we need.
"The Government will seek assurance that the
Commission's efforts to promote the use of satellite radionavigation
do not compromise Member States' choice of technology in pursuing
new initiatives such as road user charging."
1.14 The Minister then also repeats, again almost
word for word, what we were told by the Government on document
(c) about the budgetary provision in the draft Regulation:
- that it is a considerable increase
in comparison to the current Trans-European Networks programme
expenditure of €550 million in total for the development
phase (this sum is matched by funding from the European Space
Agency, of which the UK contributes €95 million);
- that it will not be possible
to agree this budget until the overarching negotiations on the
new Financial Perspective have been agreed; and
- that as the Government, along with five other
Member States, believes that Community priorities can be funded
by a budget stabilised at 1% of EU Gross National Income, the
level of funding available for Galileo will need to be consistent
with this.
1.15 The Minister, in his letter, gives us a comprehensive
account of where matters stand, following the most recent discussions
in Brussels earlier this month, in relation to all of these documents
and to the whole Galileo project. He tells us that none of the
issues has yet been finalised, so discussions are still continuing
and that the whole matter is on the agenda for the Transport Council
on 9 December 2004.
1.16 The Minister says the Presidency has drafted
Conclusions designed to provide endorsement of the programme so
far and to prepare the way for the signature, later in 2005, of
the PPP contract. Thus there is confirmation that Galileo will
provide the five basic services. He comments that the Government's
main aim on services has been to achieve a categorical statement
that the PRS is strictly for civil uses and will be used only
by those Member States which opt in to it and which pay the full
operational costs of the service. He says the Government has
also secured a clear statement that any moves to change the civil
nature of the PRS would have to be considered under the Common
Foreign and Security Policy and would therefore be subject to
unanimous decision by Member States.
1.17 The Minister goes on to say that the Presidency
wants to give as much comfort as possible to the prospective concessionaire
that its own finance will be topped up by a public sector contribution
so that it can attract investment from the financial institutions.
He says the Government has stressed that, whilst accepting that
Galileo will need some public finance in its initial operating
phase before commercial revenues build up, no commitment to pay
any specific sums can be made at least until the Financial Perspective
for the period 2007-2013 has been agreed, and Member States have
insisted that the proposed Conclusions cannot stipulate any specific
amount. He states that the Government expects that the text will
confirm the Council's commitment to a financial contribution not
to be quantified until after agreement on the Financial Perspective.
1.18 The Minister concludes: "On this basis
I am content that we will not be entering into any financial commitments
that have not been properly scrutinised as an integral part of
the whole Community budget and judged according to their priorities
and benefits."
1.19 In relation to document (c) the Minister tells
us that the draft Regulation is similarly being amended to meet
one of the Government's principal concerns — to avoid giving
the impression that the figures of €500 million for each
of the deployment and operating phases are in any way agreed.
Whilst the Commission wants to ensure that as much as possible
is done towards agreeing a Regulation establishing a budget line
for Galileo, so as not to delay the programme if the funding is
agreed, it now accepts that no specific figures can be agreed
until the Financial Perspective is settled. The text now being
discussed clearly states that the money to be allocated to the
Galileo programme will be determined after the Financial Perspective
is settled. He says the Government will maintain its reservation
on this until it knows that the money can be made available.
1.20 On the selection of a concessionaire the Minister
tells us:
"Work is still continuing on the selection of
a consortium for the Galileo deployment and operating PPP concession.
Two bids were received in September and were evaluated by the
Galileo Joint Undertaking (GJU) in accordance with the agreed
criteria. The GJU reported to the European Commission and its
Supervisory Board at the end of the month that the two bids were
very similar and that it was not possible to distinguish between
them on the basis of the information available. They recommended
therefore that the two consortia should be invited to continue
negotiations with the GJU to provide more information in the one
important area where both were similarly weak, the allocation
of risk between the public and private sectors. New evaluation
criteria are being drawn up in consultation with Member States
and will be sent to the consortia later this month. The GJU then
intends to reach a decision on the relative merits of the bidders
on the basis of additional material to be provided by the end
of January 2005. We have supported this line because it is important
to obtain the best possible understanding of where the allocation
of risk will lie and because we want to maintain a competitive
bidding process for as long as possible.
"The GJU has not made generally available the
detailed financial aspects of the bids from the potential concessionaires
because the information is commercially confidential. They have
however assured Member States that both bids have a good financial
base and that they comply with the intention that only a maximum
of one third of the deployment and operational costs will be required
to be publicly funded. The GJU has set out in very broad terms
how much the deployment and operating phases are expected to cost
on the basis of the bids as initially submitted (including provision
for replenishing the satellites in 2019-2021). This amounts,
for the duration of the concession (2006-2025) to the following:
| Capital expenditure |
(Deployment) | £2,400 million
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| (Replenishment) | £2,000 million
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| Operating expenditure |
| £2,600 million |
| Total | | £7,000 million
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"I accept that the GJU cannot release the confidential
details of the financial proposals during the competitive bidding
process but they have provided Member States with as much information
as they feel is possible and they have given assurances that the
financial projections look promising. They have also allowed
one representative from each country to review all the documentation
on the evaluation of the bids (in conditions of strict confidentiality
because of the commercial sensitivities); the UK has taken advantage
of this and we have as a result been able to make a useful contribution
to discussions in the Working Parties. On this basis I am content
to follow the GJU's advice whilst maintaining a careful watch
to ensure that there is no departure from what is expected to
be the balance of public and private finance."
1.21 In relation to negotiations with non-Member
States the Minister says:
"There is a great deal of interest from non-Member
States about the Galileo programme. The European Commission has
been making progress with a number of countries but in all cases
they have kept the Special Negotiating Committee informed of the
results and they have ensured that the agreed negotiating mandates
have been complied with. This relates particularly to the sensitive
areas, such as access to the proposed Public Regulated Service,
that are excluded from the negotiations. Negotiations are based
either on securing agreements with countries that already have
special skills in satellite navigation, including its 'downstream'
applications, or on securing the involvement of countries whose
main interest stems from using the system as end-users, service
providers or equipment manufacturers, thereby assuring the world-wide
market for Galileo and its applications. The latest update report
from the Commission indicates that their current priorities include
pursuing talks with the Russian Federation on the linking of Galileo
with their GLONASS system, with India, Ukraine, Brazil and South
Korea on defining the extent of co-operation and with China on
contracting the first industrial activities. The most recent
development has been the Council's approval of the negotiating
directives with the Ukraine on 7 October, of which I notified
you in my letter of 28 October 2004.[12]
The procedures for approving and supervising these activities
by Member States are now quite well established so we will continue
to participate actively and watch for any unnecessary departures
from the agreed principles."
1.22 Finally, in connection with the Supervisory
Authority and the question of security and safety, the Minister
tells us that, other than advertising for an Executive Director,
who is anticipated to be in post in the first part of next year,
and that the authority will be established in a shadow form to
start work in parallel with the negotiations on the PPP contract,
there have been no further developments. The Minister says:
"The Commission has told us that they want [the
authority's] Executive Director to play a major role in these
negotiations. It obviously makes sense to wait for the appointment
of the Executive Director before making any further moves to establish
the organisation for which he will be responsible and the security
structures which will be necessary to control access to the Public
Regulated Service, although we are continuing to maintain a dialogue
with the Commission so that they understand and take account of
the UK Government's position. Once an Executive Director has
been appointed we will be seeking an early opportunity to meet
him and discuss the next steps with a view to offering help and
exerting whatever influence we can."
The Minister says the Government will keep us informed
of progress on this issue.
Conclusion
1.23 The Transport Council is likely, in December,
to agree Conclusions that, albeit without any commitment to actual
amounts for a public finance contribution, will commit the Community
to deployment and operation of Galileo. It appears that there
is a lock which will prevent any move towards military uses for
the encrypted Public Regulated Service without the consent of
all Member States, that the possible participation of third countries
in Galileo is being carefully supervised by Member States and
that the management of safety and security issues will be dealt
with in due course.
1.24 But we remain concerned that a drift to major
public expenditure on Galileo remains a danger. We note that,
for understandable reasons, the full cost implications of the
PPP might be subject to public debate only as negotiations with
a preferred concessionaire near completion. This suggests to us
that, as the Minister implies, any decisions taken at the Transport
Council discussion on 9 December should be framed as cautiously
as possible in relation to future public funding. Equally, we
are concerned that decisions on Galileo should be taken in the
context of a realistic timetable.
1.25 As noted above, Galileo has already been
debated twice in European Standing Committee A. Nevertheless,
given that the Galileo project is at a decisive point, we think
a further debate in European Standing Committee A before the Transport
Council discussion on 9 December would be timely, and we recommend
accordingly. Such a debate would give Members the opportunity
to examine again, before the Council takes what will be in effect
a firm commitment to carry the Galileo project to completion,
the overall utility of the project and the various points that
have from time to time been at issue. These include the costs,
especially of the Public Regulated Service, military use and the
relationship of Galileo to GPS, third country participation
and safety and security.
1.26 We are pleased to see that the Transport
Committee has been taking evidence on Galileo and we note that
anything it publishes would be highly relevant to the debate we
have recommended.
1 See headnote. Back
2
See Stg Co Deb, European Standing Committee A, cols 3-26. Back
3
That is, under the inter-governmental Common Foreign and Security
Policy. Back
4
See headnote. Back
5
Ibid. Back
6
See (25847) 11607/04 (25868) 11741/1/04 (25869) 11745/04 (25874)
11752/04: HC 42-xxxiv (2003-04), para 13 (27 October 2004). Back
7
See headnote. Back
8
Ibid. Back
9
Open Service (OS), free of charge at the point of use; Commercial
Service (CS), offering added value for more demanding uses; Safety
of Life Service (SoL), for safety-critical applications that require
high integrity; Search and Rescue Service (SAR), to complement
the current COSPAS-SARSAT system [International Satellite Search
and Rescue System founded by Canada, France, the former USSR and
the USA in 1988 and with 33 countries now participating]; Public
Regulated Service (PRS), a high-performance, encrypted service
for authorised civil government applications.
Back
10
Public Regulated Service. Back
11
Pillar II is the Common Foreign and Security Policy. Back
12
Which negotiations we will be reporting on when the Council is
asked to approve a draft agreement. Back
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