Select Committee on European Scrutiny Thirty-Sixth Report

9 Global navigation satellite system




COM(06) 272




COM(06) 261

Commission Communication: Taking stock of the Galileo programme

Draft Regulation amending Regulation (EC) No 1321/2004 on the establishment of structures for the management of the European satellite radio-navigation programmes

Legal base(a) —

(b)Article 308 EC; consultation; unanimity

Documents originated(a) 7 June 2006

(b) 2 June 2006

Deposited in Parliament(Both) 20 June 2006
Basis of considerationEMs of 13 July 2006
Previous Committee ReportNone
To be discussed in Council(a) October 2006

(b) Probably December 2006

Committee's assessmentPolitically important
Committee's decision(a) Cleared

(b) Not cleared, further information requested


9.1 The 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) systems, augmented by EGNOS. Galileo is being carried out in conjunction with the European Space Agency (ESA). There are a number of agreements in place or being negotiated with third countries about co-operation in the Galileo project.

9.2 It is intended that Galileo will allow provision of five services. These are known as the:

  • 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); and
  • Public Regulated Service (PRS), a high-performance, encrypted service for authorised civil government applications.

9.3 The Galileo programme has three phases:

  • the development and validation phase — development of the satellites and the system's ground components, as well as validation in orbit. This phase was due to run from 2003 to 2005, but will now continue until 2009. The project is currently in the validation part of this phase;
  • the deployment phase — building and launching the satellites and the establishment of the entire ground-based component. This phase was due to for 2006 and 2007 but will now be taken forward between 2009 and 2010; and
  • the commercial operating phase — commencement of the full commercial operation of the system. This phase was due to begin in 2008 and will now begin from the end of 2010.

9.4 It is intended that a public private partnership (PPP) will be established for the Galileo programme. The Galileo Joint Undertaking (GJU) has been responsible for managing the programme's development phase for the Community and the ESA, including the procedure to select the future private-sector concessionaire to run the PPP. It was created for four years, which it was assumed would be sufficient time to see it through until the end of the development phase of the project. In 2004 a GNSS Supervisory Authority (GSA) was established to manage the public interests relating to European satellite radio-navigation programmes — currently EGNOS and Galileo. It is be the formal owner of these two systems and to act as the regulatory authority for the concessionaire during deployment and operation. The GSA is expected to become fully operational in the course of 2006.

9.5 From early in 1999 previous Committees reported to the House on many aspects of the Galileo project, most recently in November 2004 and May 2006.[29] The matter has also been debated three times in European Standing Committee A, the last occasion being 2 December 2004.[30]

The documents

9.6 The Commission's Communication, document (a), both asserts the qualities of, and reports where matters now stand on, the Galileo project. It says:

  • Galileo's five services will deliver improvements and positional accuracy in excess of that currently being delivered by the GPS system;
  • the world-wide market in satellite navigation and services is estimated to deliver an annual worldwide turnover of €300 billion (£207 billion) and about 150,000 jobs in the Community alone by 2020;
  • the first experimental Galileo satellite, GIOVE A, was launched in December 2005 from Kazakhstan and has been successfully transmitting Galileo signals from space. The second test satellite should be launched at the end of 2006;
  • the costs of the development phase and the In Orbit Validation (IOV) phase of the programme are €1,500 million (£1,042 million) and €1,038 million (£721 million) respectively. These are shared equally by the ESA and the Community, who are jointly responsible for these two preparatory phases of the programme;
  • contract negotiations with the consortium bidding for the 20-year PPP concession for Galileo started formally at the beginning of 2006. The consortium comprises eight companies — Aena, Alcatel, EADS, Finmeccanica, Hispasat, Inmarsat, Thales and TeleOp — from the Member States with major space industries, France, Germany, Italy, Spain and UK. By the end of 2006 the estimated costs and the requirement for the public sector contribution should be finalised, the main terms of the contract (the Heads of Terms) should be fixed and the financial plan should be confirmed. Finalising the contract financial plan and the contract would then be taken forward along with the appropriate due diligence procedures by financial lenders. Financial closure and the signing of the concession contract would take place between June and December 2007. The Commission expects to provide the Council with "a summary showing the sharing of risks between the private and public sectors and the distribution of the main rights and obligations between both sectors" at the end of 2006;
  • to allow the GJU more time to conclude the contract negotiations and ensure that sufficient expertise and knowledge can be transferred smoothly to the GSA, it is proposed to extend the GJU's existence to the end of 2006;[31]
  • the GSA has been set up in Brussels temporarily, pending a decision on a location for its headquarters. Its initial objectives will be to take over the responsibilities of the GJU, to integrate the EGNOS and Galileo programmes and to take forward research and development on satellite technology;
  • EGNOS is now in operation and has passed its first operational readiness review. Work is underway so that it can be certified for safety critical application in civil aviation;
  • the GSA will prepare common rules on minimum standards for the use and management of the governmental PRS service and on specifications for the construction of receivers for the service. By the end of 2006, the Commission intends to be able to propose a plan for implementation of a PRS access policy and for the necessary technical and decision making mechanisms;
  • the Commission will present a Green paper on Galileo applications by the end of 2006;
  • the draft Regulation[32] on financing the implementation of the deployment and commercial operating phases of Galileo has already attained partial general agreement but it will not be finally agreed until both an overall decision has been reached on the next budgetary cycle and the overall cost envelope for the PPP is known. It is expected that this will be after agreement has been reached on the Heads of Terms; and
  • the Commission continues to pursue international co-operation agreements for the current phase with third countries. Agreements have been signed with China, Israel and Ukraine. Agreements have also been initialled with India, the Republic of Korea and Morocco, and discussions are under way with Norway, Argentina, Brazil, Switzerland, Saudi Arabia, Canada and Australia.

9.7 The draft Regulation, document (b), would amend the Regulation which established the GSA to allow it to complete the development phase of the Galileo programme after the GJU is wound up at the end of December 2006. The Commission say that maintaining the GJU alongside the GSA would lead to an unjustified duplication of structures and costs and propose transfer of activities between the GJU and the GSA by the end of 2006, well before the completion of the development phase. Until then, the two structures would continue to co-exist, by which time it is expected that a sufficient amount of experience and knowledge will have been transferred to the GSA. The draft Regulation would:

  • permit the GSA to manage the development phase before and after the GJU is disbanded, including finalising technological developments on the basis of an agreement to be concluded with the ESA, supervising the implementation of the development phase, preparing the deployment and operation phases, and negotiation of the concession contract;
  • allow the Administrative Board of the GJU to attend to the proceedings involved in winding up the GJU after 31 December 2006, should the GSA so decide;
  • allow the GSA to carry out all research of benefit to the GNSS programme;
  • enable the GSA to assume ownership of all tangible and intangible assets that were created and developed before the disbanding of the GJU; and
  • tighten up the rules on the ownership of intellectual property, in particular trade mark rights, developed under the programme by the concessionaire, subcontractors or by undertakings under its control or by their subcontractors.

The Government's view

9.8 Commenting on the Commission's stocktaking Communication, document (a), that overall it does not provide a searching assessment of the current state of play, the Minister of State, Department for Transport (Dr Stephen Ladyman) tells us that the Government continues to work to maintain its priority objectives:

  • achieving a robust and viable PPP;
  • maintaining Galileo as a civil programme under civil control; and
  • influencing development and financial control of the project to ensure a transparent process which can deliver a value for money deal for the Community.

9.9 The Minister then comments extensively on the present and prospective situation on Galileo, saying:

  • in December 2004 the Transport Council called upon the Commission to ensure an assessment of the final costs and risks of the concession contract be submitted to Council before the PPP contract is signed. The Government has proposed robust criteria for this assessment and will seek confirmation that the Commission will provide such an assessment and not a basic "summary" as suggested in this document;
  • the programme timetable continues to slip. Differences within the consortium continue and progress has not been made on the most difficult elements — market risk and design risk — of the contract. Although the updated timetable for the Galileo programme, including the negotiations, is more realistic than previous deadlines it will be very demanding to achieve it;
  • the Government will continue to press for more transparency on finance. It and other Member States are concerned that the Commission refuses to discuss the total costs of the PPP. The Government is concerned that costs could escalate;
  • the Government and other Member States support the need for an efficient transition of responsibilities from the GJU to the GSA, avoiding duplication of structures and costs between the two organisations. The Government believes it is necessary to ensure the GSA is properly resourced to manage the Galileo programme effectively, but will call on the GSA and Commission to demonstrate proper and effective project management to justify any request for increased resources;
  • the Commission's review of the status of the EGNOS programme presents an optimistic analysis of the current state of play. Although the system has been technically successful and good results have been achieved in testing for limited periods, a number of ongoing problems have led to the postponement of the Operational Qualification Review (OQR), which is the necessary pre-requisite to certification. Consequently, the OQR is now unlikely to be delivered at the end of 2006 as previously expected. These delays have led to further costs, estimated by the ESA to be up to €2 million (£1.39 million) per month, which will have to be met;
  • the Commission has indicated that it has reached agreement with the ESA on providing the necessary bridging finance from the Trans-European Networks budget for EGNOS to March 2007. This should see EGNOS through to delivery of OQR. Between that delivery and March 2008 €50 million (£35 million) would, if necessary, be made available jointly by the Community and the ESA to finance the programme until the latter date, subject to the PPP contract having been signed by the end of 2007;
  • the Commission will shortly circulate a paper setting out in full the details of these proposals. At present there is no agreement within the ESA to meet their share of the costs. The Government fully understands the need to ensure the continuing operation of the system until it can be certified for safety-critical aviation use, but it has impressed on the Commission and the ESA its view that this process should only be adopted if it is clear that certification will be achievable within a reasonable amount of time. Otherwise there will be a continuing demand for money to keep the system going while it remains unclear when a viable and certified system, useful as an aviation navigational aid, can be delivered;
  • the Government will continue to work with the Commission and other Member States to shape the proposed documents on the use of the Galileo PRS service. The Government's approach will be governed by the agreed Government objective — shared by the Council, the Commission and the European Parliament — that Galileo should be a civil programme under civil control. The Transport Council agreed in December 2004 that any change to that principle would require further political consideration, in a context which requires unanimity;
  • the GSA is required to establish a body to manage the security and safety of the Galileo system. In relation to the Council Joint Action on the security aspects of the Galileo programme the Government told the previous Committee that GSA security bodies will be set up by a further Joint Action.[33] Member States have yet to review the necessity for, or the terms of any such Joint Action, as the nature of the proposed System Safety and Security Committee and other GSA structures have yet to be fully defined. The Commission, the GSA Director and Member States are currently examining proposals for setting up a suitable administrative structure for the GSA and its attendant bodies that would best allow the GSA to carry out its tasks and meet its responsibilities;
  • the Government believes that the involvement of third countries in Galileo needs careful consideration. As a civil project Galileo has the potential to provide economic benefits through the development of a wide range of applications, not only for Member States but also for third countries wishing to invest in the project. Other Member States share the Government's desire for progress to be made on setting out the framework and principles to clarify Community policy in this area. Options vary from full membership of the GSA, which would entail full participation in the costs and risks of the project, to associate membership which would still allow for market development of Galileo;
  • a number of countries have bid for the permanent headquarters of the GSA. The UK bid for the Agency to be located in Cardiff continues to be promoted by the Welsh Assembly Government with support from the Government. A decision on this may be taken before the end of 2006. The Government is pressing for the process to be transparent and for the decision be taken on the basis of the merits of the respective bids, the technical expertise available at the locations and in particular the security requirements of the Galileo project. This will help to ensure that Cardiff receives fair consideration, but political influences will be important in the eventual decision;
  • in relation to an additional €201 million (£139 million) contribution required for the overrun on the IOV phase of Galileo, the Commission has confirmed that an additional €130 million (£90 million) was set aside under the Trans-European Networks budget line for the Galileo programme in 2004. It proposes to call on the Trans-European Networks Financial Committee for an additional €50 million (£34.5 million) as part of the consideration of the new financial perspectives. The remainder is expected to be made available from the GJU budget after it is wound up; and
  • in relation to a question from the House of Lords Select Committee on the European Union on the type of transport application where guaranteed accuracy is essential when using the SoL service, the additional integrity information and accuracy of the service could constitute a complementary source of positioning information for the new European Rail Transport Management System/European Train Control System standards for high-speed trains and could allow for precise and reliable maritime navigation by integrating Galileo with other technologies — such as Automatic Identification Systems and the Electronic Chart Display and Information System. The Commission mentions the possibility of certification for such applications and work is beginning in the International Maritime Organization on standards for GNSS receivers.

9.10 In relation to the draft Regulation in document (b) the Minister first discusses the use of Article 308 EC as the legal base. He notes that:

  • as an Community regulatory agency, the GSA's primary role is to own and regulate the Galileo system, regulate the contract with the concessionaire and manage public interests in relation to the system;
  • although Article 171 EC (under which "the Community may set up joint undertakings or any other structure necessary for the efficient execution of Community research, technological development and demonstration programmes" ) was used to establish the GJU and although there are some tasks — such as supervising the efficient use of Community research and development funding for Galileo — which the GSA will inherit from the GJU, this is not its primary function. So the Government does not consider Article 171 EC to be a suitable legal basis for the proposal;
  • although Galileo is one of the projects listed under the 2004 Trans-European Network — Transport guidelines[34] and the current development phase is partially funded from Trans-European Network grants, Article 155 EC is for establishing and maintaining community guidelines for the management of the Trans-European Networks. So the Government does not consider Article 155 EC to be a suitable legal base for this proposal;
  • Article 308 EC was used to establish the GSA; and
  • the GSA is expected to contribute to the development of numerous applications in areas that are associated directly or indirectly with Community policies identified under Article 3 EC, which are relevant to the operation of the common market. Examples include transport (positioning and measurement of the speed of moving bodies), insurance, road tolling, customs and excise operations, agriculture (grain or pesticide dose control) and fisheries (monitoring of boat movements).

9.11 As for the policy implications of the draft Regulation the Minister says that the Government — along with most other Member States — supports a speedy and smooth transition of responsibilities from the GJU to the GSA before the end of the development phase of the project — now scheduled for 2008. The Government agrees that the best way to prevent unnecessary additional costs is to close the GJU by the end of 2006.

9.12 The Minister continues that the Government supports the principle that ownership of intellectual property rights in respect of Galileo should, wherever possible, reside in the public sector and ownership by the GSA of the tangible and intangible assets from the concessionaire, its subcontractors, the undertakings under its control and in turn by their subcontractors. However, he says there are some issues in relation to intellectual property rights which the Government would like to see addressed in the draft Regulation, in particular:

  • more clarity in relation to background intellectual property rights — that is who owns the rights a company or Member State already has a right which is later adapted or developed for use in the programme. As currently drafted the proposal may interfere or purport to interfere with existing rights;
  • as worded the proposal may prevent the GSA from agreeing that a right be retained by the concessionaire or a subcontractor, even where such an arrangement would deliver value for money; and
  • more clarity over who is responsible for keeping and defending intellectual property rights for Galileo — the concessionaire or the GSA.

9.13 Finally, the Minister notes that the proposal does not refer to the voting rights of third countries in the GSA and that it is not clear what the Commission has in mind in this respect.


9.14 It is regrettable that, as the Minister notes, the long-awaited report from the Commission, document (a), is not a searching assessment of the current state of play on Galileo. Thus we support the Government's insistence that there must be a robust assessment of the final costs and risks of the proposed concession before the contract is signed. We also wish to highlight that such an assessment should be available in time for proper scrutiny by national parliaments. Member States, their parliamentarians and their tax-paying citizens have a right to expect nothing less.

9.15 We would wish particularly to see in such an assessment an even more realistic timetable than the latest one, complete transparency in the financing of the project and details of the proposed safety and security arrangements, including the question of a further Council Joint Action. Meanwhile we clear this document.

9.16 As for the draft Regulation, document (b), we endorse the intention to minimise the duplication of structures and costs of the GJU and the GSA. But before considering the proposal further we should like to hear of progress in addressing the issues relating to intellectual property rights. Meanwhile we do not clear this document.

29   (25690) (25715) 9941/04 (25879) 11834/04 (26012) 13300/04: See HC 42-xxxvii (2003-04), para 1 (17 November 2004) and (27402) 8014/06: HC 34-xxviii (2005-06), para 12 (10 May 2006). Back

30   See Stg Co Deb, European Standing Committee A, 2 December 2004, cols 3-30. Back

31   We are expecting to see an Explanatory Memorandum on Council document 10431/06 in due course. Back

32   (25690) (25715) 9941/04: See HC 42-xxii (2003-04), para 12 (9 June 2004), (25879) 11834/04: HC 42-xxxi (2003-04), para 4 (15 September 2004), (26012) 13300/04: HC 42-xxxvii (2003-04), para 1 (17 November 2004), and Stg Co Deb, European Standing Committee A, 2 December 2004, cols. 3-30. Back

33   Ibid. Back

34   The guidelines identify the key routes and priority projects of common interest in the areas of transport, and telecommunications and energy. Back

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