9 Global navigation satellite system
| (a)
(27592)
10427/06
COM(06) 272
(b)
(27593)
10431/06
COM(06) 261
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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
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| Legal base | (a) —
(b)Article 308 EC; consultation; unanimity
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| Documents originated | (a) 7 June 2006
(b) 2 June 2006
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| Deposited in Parliament | (Both) 20 June 2006
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| Department | Transport |
| Basis of consideration | EMs of 13 July 2006
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| Previous Committee Report | None
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| To be discussed in Council | (a) October 2006
(b) Probably December 2006
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| Committee's assessment | Politically important
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| Committee's decision | (a) Cleared
(b) Not cleared, further information requested
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Background
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.
Conclusion
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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