9 European defence equipment market
| (28212)
6223/07
+ ADDs 1-2
COM(06) 779
| Commission Interpretative Communication on the application of Article 296 of the Treaty in the field of defence procurement
|
| Legal base | — |
| Document originated | 7 December 2006
|
| Deposited in Parliament | 9 January 2007
|
| Department | Defence |
| Basis of consideration | Minister's letter and EM of 30 January 2007
|
| Previous Committee Report | None; but see (26019) 13177/04: HC 42-xxxvii (2003-04), para 3 (17 November 2004) and
(24451) 8484/03: HC 63-xxiii (2002-03), para 22 (4 June 2003)
|
| To be discussed in Council | Yet to be decided
|
| Committee's assessment | Legally and politically important
|
| Committee's decision | Not cleared; further information requested
|
Background
9.1 The Commission's Green Paper 13177/04 of 23 September 2004
on Defence Procurement followed its May 2003 Communication 8484/03,
"European Defence — Industrial and market issues —
towards an EU defence policy", the aim of which was to improve
the EU regulatory framework so as to promote a robust, internationally
competitive "Defence and Technological Industrial Base".
The Committee cleared this in 4 June 2003, noting that the Government
remained committed to promoting a non-interventionist model and
to overcoming the obstacles to effective market access overseas.[36]
9.2 After examining the nature of the European defence
equipment market, the Green Paper then looked at the current legal
framework in the following terms:
3.1 Community exemption system
"The special nature of the defence sector has
been recognised ever since the establishment of the Community
through an exemption system laid down in Article 296 EC of the
Treaty. According to paragraph 1 of that Article:
(a) no Member State shall be obliged to supply
information the disclosure of which it considers contrary to the
essential interests of its security; and
(b) any Member State may take such measures as
it considers necessary for the protection of the essential interests
of its security which are connected with the production of or
trade in arms, munitions and war material; such measures shall
not adversely affect the conditions of competition in the common
market regarding products which are not intended for specifically
military purposes.[37]
"Given its wide scope, this article may also
apply to public procurement. As recently clarified in Article
10 of Directive 2004/18/EC, Community rules on public procurement
apply to contracts awarded by the awarding authority in the field
of defence, subject to Article 296 EC of the Treaty. Consequently,
Community rules also apply in principle to the defence sector,
but Member States may derogate from them in the circumstances
and subject to the conditions set out in the Treaty. In any event,
the possibility of a derogation provided for under Article 296
EC cannot apply either to civilian goods or to those not intended
for specific military purposes, even if they are purchased by
national defence ministries.
"The case law of the Court has interpreted the
conditions of use of this derogation restrictively, stating that
— its
use does not constitute a general, automatic exemption, but should
be justified case by case. States thus have the possibility of
secrecy regarding information which would undermine their security
and the option of invoking an exemption to internal market rules
for the arms trade. They are also obliged to assess whether or
not each individual contract is covered by the derogation;
— use by states of national derogation
measures is justified only if it is necessary for achieving the
objective of safeguarding the essential security interests invoked;
— burden of proof lies with a Member State
that intends to make use of the derogation; and
— such proof is to be supplied, if necessary,
to the national courts or, where appropriate, the Court of Justice,
to which the Commission may refer the matter in the performance
of its duties as guardian of the Treaty.
"As a general rule, Member States may, therefore,
derogate from the rules of the Treaty and Community directives,
but only in well defined circumstances."
9.3 Nevertheless, the Commission says "several
difficulties of implementation arise":
- in the absence of a precise
interpretation of these provisions, "there is quasi systematic
use of the derogation in the area of public procurement",
with outcomes that "imply that some Member States believe
they can apply the derogation automatically";
- with no definition in either Community law or
ECJ case law of essential interests of security, "in practice
states allow themselves wide discretion in determining which contracts
could damage them"; and
- the list drawn up in 1958 "is not an appropriate
reference for defining the scope of Article 296 EC", since
it has never been officially published or revised.
9.4 The list is referred to in Art 296 EC (2), which
says that:
"The Council may, acting unanimously on the
basis of a proposal from the Commission, make changes to the list,
which it drew up in April 1958, of the products to which the provisions
of paragraph 1(b) apply".
9.5 The Green Paper concluded in this section that
"defence procurement is still, therefore, to a large extent
covered by purely national legislation." Most of such national
legislation "provides for exemptions to the application of
public procurement rules, with differing degrees of transparency.
This constitutes a potential difficulty for non-national suppliers."
9.6 The Green Paper then briefly analysed attempts
hitherto at greater transparency and more open competition in
defence supplies via the Western European Armaments Group[38]
(limited results regarding both transparency and competition,
because it is not legally binding) and OCCAR (set up in 1996 and
given legal personality in 2000; where, as the Green Paper noted,
success "will depend on the number of new programmes managed
by OCCAR").[39]
Given the failure to achieve satisfactory results, Member States
decided to create a European Defence Agency under the authority
of the Council with the remit, among other things, to contribute,
in consultation with the Commission, to the setting up of a competitive
European defence market.
9.7 We considered the European Defence Agency on
several occasions, finally recommending the Joint Action establishing
it for debate in the European Standing Committee B in June 2004.[40]
The EDA was formally established in July 2004.[41]
9.8 Against this background, the Commission floated
two alternatives for the future:
— clarifying,
by way of an Interpretative Communication, the existing legal
framework, including the identification of the types of contract
that fall within the scope of Article 296 TEC. This Article allows
Member States to derogate from the EU procurement rules under
specified national security conditions. The Commission indicates
that there is evidence to suggest that the application of Article
296 EC by individual Member States is interpreted differently;
and
— examining the desirability of adapting
the EC's acquisition rules to take into account the specific characteristics
that differentiate defence equipment acquisition from other forms
of public procurement. As part of this, the Commission considers
the possibility of creating a new Directive to coordinate defence
procurement procedures in cases where Article 296 EC is not applicable.
The Commission envisages that such a proposal, if implemented,
would be linked with new, flexible EU-wide rules, which would
take into account the specific nature of the defence sector. The
Green Paper notes that any such instruments would not prejudice
any complementary measures taken by the Member States.
9.9 In response, the Government reiterated its support
for increasing the openness and transparency of the European defence
equipment market and the global competitiveness of European defence
industry and recognised that the Commission's initiative had the
potential to deliver improvements in cooperative practices, reduce
market distortions, and improve access to European defence markets,
all of which were aims of the UK's Defence Industrial Policy.
It considered that the Green Paper did not appear to cover sensitive
areas of defence equipment, covered by Article 296 EC, but seemed
intended to open up other areas of the defence equipment market
not covered by the Article (or meant to be covered by the Article).
9.10 However, the Government had already indicated
to the Commission that it did not favour the automatic use of
regulation. Instead, it had been assessing, in tandem with industry,
alternative approaches to create a more open and transparent European
defence equipment market, including a voluntary Code of Conduct
that would set out the conditions which could improve the ability
of a much wider range of companies to compete for European defence
business and would use the European Defence Agency, which it saw
as having a key role in developing this initiative further with
the Commission.
9.11 We recommended the Green Paper for debate in
the European Standing Committee B, which took place on 8 February
2005. In that debate, the Minister of State for the Armed Forces
in the Ministry of Defence (Adam Ingram) said:
"The Government believe that an interpretive
communication might have some benefit, in that it could clarify
the existing framework and particularly the use of Article 296.
However, we do not believe that the benefits that might result
from introducing a specific defence procurement directive are
sufficient to offset the drawbacks. In particular, an additional
regulatory burden on top of those already in place is unlikely
to support our aim of making defence markets more effective and
efficient. We do not, therefore, support the development of a
new directive at this time".[42]
9.12 The Code of Conduct was agreed on 21 November
2005. According to its website, the EDA's 24 participating Member
States (pMS) agreed on the need for decisive progress towards
creation of an internationally competitive European Defence Equipment
Market, as a key means to strengthen the European Defence Technological
and Industrial Base and, recognising that a significant proportion
of their defence procurement takes place outside EU internal market
rules, on the basis of Article 296 EC, decided:
"without prejudice to their rights and obligations
under the Treaties, to establish a voluntary, non-binding intergovernmental
regime aimed at encouraging application of competition in this
segment of Defence procurement, on a reciprocal basis between
those subscribing to the regime". Member States who choose
to subscribe to the Regime ("subscribing Member States",
or sMS) will undertake to open up to suppliers having a technological
and/or industrial base in each others' territories, all defence
procurement opportunities of €1m or more where the conditions
for application of Art. 296 are met, except for procurement of
research and technology; collaborative procurements; and procurements
of nuclear weapons and nuclear propulsion systems, chemical, bacteriological
and radiological goods and services, and cryptographic equipment.
"Within the scope of the regime thus defined,
it is recognised that sMS may exceptionally need to proceed with
specific procurements without competition, in cases of pressing
operational urgency; for follow-on work or supplementary goods
and services; or for extraordinary and compelling reasons of national
security. In such exceptional cases sMS will, once the procurement
route has been confirmed, provide an explanation to the EDA, in
its capacity as monitor of the regime on behalf of sMS. Data will
also be provided to the Agency on collaborative procurements".[43]
The Commission's Interpretative Communication
9.13 By way of background, the Commission recalls
that:
— defence
procurement accounts for a large share of public procurement in
the European Union: combined defence budgets worth about €170
billion, including more than €80 billion for procurement;
mostly split into relatively small, fragmented and closed national
markets — "25 different customers and 25 different
regulatory frameworks";
— this fragmentation is a major obstacle
to both intra-European cooperation and competition, with extra
costs and inefficiencies having a negative impact on the competitiveness
of Europe's Defence Industrial and Technological Base as well
as on Member States' efforts to equip their armed forces adequately;
— defence procurement law is an important
element of this fragmentation, with the majority of defence contracts
exempt from Internal Market rules and awarded on the basis of
national procurement rules, which have widely differing selection
criteria, advertising procedures, etc; and
— all of this limits market access for
non-national suppliers and hampers intra-European competition.
9.14 Recalling the earlier Communication and Green
Paper, the Commission says that its consultations confirmed that:
— since
the dividing line between defence acquisitions which concern essential
security interests and those which do not is vague, it is not
always clear which rules should apply to which contracts, so the
application of Article 296 EC remains problematic and varies considerably
between Member States.
— the current Public Procurement (PP) Directive,
even in its revised version (2004/18/EC),[44]
is ill-suited to many defence contracts, since it does not take
into account some special features of those contracts, leaving
many Member States reluctant to use the PP Directive for defence
equipment, even if the conditions for the application of Article
296 are not met.
9.15 So,
based on these findings,
the Commission announced in December 2005 two separate but complementary
initiatives to address their concerns:
— issue
of an Interpretative Communication on the application of Article
296 TEC in the field of Defence Procurement, not to modify, but
clarify the existing legal framework; and
— preparation of a possible new defence
directive on the procurement of defence equipment to which the
derogation in Article 296 TEC does not apply: "to offer new,
more flexible rules adapted to the specific characteristics of
the defence sector".
9.16 The IC was formally published on 7 December
2006, accompanied by the Commission's staff working documents,
SEC(2006) 1554 IC (Impact assessment) and SEC(2006) 1555 IC (Impact
assessment summary), which set out the Commission's rationale
for producing and publishing the IC. The Commission says that
its objective is "to prevent possible misinterpretation and
misuse of Article 296 EC in the field of defence procurement".
To achieve this objective, the Commission will set out its views
on the principles governing the application of Article 296 EC
and explain its understanding of the conditions for the application
of the derogation in the light of the Court's case law, since
"the final word on the determination of the ambit of Article
296 EC lies with the Court of Justice". It says that the
IC:
"can neither give an interpretation of Member
States' essential security interests nor determine ex ante to
which procurement contracts the exemption under Article 296 TEC
applies or not. It will rather give contract awarding authorities
some guidance for their assessment whether the use of the exemption
is justified. Clarification of the existing legal framework is
a necessary first step towards greater openness of European defence
markets".
9.17 At the same time, the Commission says it is
also "assessing the impact of a possible new defence specific
directive", and that "combining the present Communication
with such a directive may in fact be the most appropriate approach
at Community level to cope with the difficulties of applying Article
296 TEC".
9.18 The IC also seeks to complement the EDA Code
of Conduct on Defence Procurement — the former addressing
the decision-making process for invoking Article 296; the latter
seeking to open up the market where Article 296 has been invoked.
9.19 The IC covers only defence procurement by national
authorities inside the European Internal Market. It does not deal
with arms trade with third countries, which continues to be governed
by WTO rules, and in particular the Government Procurement Agreement.
9.20 The IC first reviews the Treaty Base.
It says that the exemption of defence contracts from the rules
of the Internal Market is a measure connected with the trade in
arms, ammunition and war material and that, accordingly, its legal
basis is Article 296(1)(b) EC. Member States can use this exemption
for the award of defence contracts, provided that the conditions
laid down in the Treaty as interpreted by the Court of Justice
are fulfilled. At the same time, the scope of Article 296(1)(b)
EC is limited by the concept of "essential security interests"
and the list of military equipment mentioned in paragraph 2 of
that Article. Article 296(1)(a) TEC goes beyond defence, aiming
in general at protecting information which Member States cannot
disclose to anyone without undermining their essential security
interests. This
can also concern the public procurement of sensitive equipment,
in both the defence and the security sector. In general, however,
possible confidentiality needs related to the procurement process
for military equipment are covered by Article 296(1)(b) EC.
9.21 The IC then considers Security Interests
and Treaty Obligations. It says that "it is Member States'
responsibility to define and protect their security interests",
which Article 296 TEC recognises by providing a derogation for
cases where compliance with European law would undermine Member
States' essential security interests. However, the Commission
says that using Article 296 EC for defence procurement results
in the non-application of Directive 2004/18/EC — the legal
instrument intended to secure respect for the basic provisions
of the Treaty relating to free movement of goods and services
as well as freedom of establishment in the area of public procurement
(Articles 28, 43, 49 EC):
"The rules of this Directive are the expression
of the fundamental principles and objectives of the Internal Market.
Thus, any derogation under Article 296 TEC touches the core of
the European Community and is, by its very nature, a legally and
politically serious matter. The Treaty therefore contains strict
conditions for the use of this derogation, balancing Member States'
interests in the field of defence and security against the fundamental
principles and objectives of the Community. The aim of these conditions
is to prevent possible misuse and to ensure that the derogation
remains an exception limited to cases where Member States have
no other choice than to protect their security interests nationally.
The Court of Justice has consistently made it clear that any derogation
from the rules intended to ensure the effectiveness of the rights
conferred by the Treaty must be interpreted strictly".
9.22 All in all, as exemplified by ECJ judgments,
"both the field and the conditions of application of Article
296 EC must be interpreted in a restrictive way".
9.23 The IC then examines the Field of Application,
with particular reference to the 1958 List
(adopted on 15 April 1958 as Council Decision
255/58). It notes that Article 296(1)(b) EC allows for measures
"connected with the production of or trade in arms, munitions
and war material" specified in the 1958 List. According
to the Court, it is clear that Article 296(1)(b) EC "is
not intended to apply to activities relating to products other
than the military products identified on [that] list".
At the same time, the Commission says, the
interpretation of Article 296 (1)(b) EC and the definition of
its field of application must also take into account the evolving
character of technology and procurement policies:
"With regard to technology, the 1958 list seems
sufficiently generic to cover recent and future developments.
Similarly, Article 296(1)(b) EC can also cover the procurement
of services and works directly related to the goods included in
the list, as well as modern, capability-focused acquisition methods,
provided always that the other conditions for the applicability
of Article 296 EC are met".
9.24 On the other hand, the Commission notes, the
1958 list includes only equipment which is of purely military
nature and purpose. Although security has become an increasingly
complex concept, with new threats blurring the traditional dividing
line between military and non-military, external and internal
security dimensions, the Commission argues that, since the roles
of military and non-military security forces still differ, it
is normally possible to distinguish between military and non-military
procurement; and that the nature of the products on the 1958 list
and the explicit reference in Article 296 TEC to "specifically
military purposes"
confirms that only the procurement of equipment which is designed,
developed and produced for specifically military purposes can
be exempted from Community rules on the basis of Article 296(1)(b)
EC.
9.25 Procurement for non-military security purposes:
"by contrast, is excluded from the field of
application of Article 296(1)(b) TEC. For these procurements,
security interests may justify the exemption from Community rules
on the basis of Article 14 of the PP Directive, provided that
the conditions for its application are met. In contrast to Article
296(1)(b), Article 296(1)(a) TEC can also cover the procurement
of dual-use equipment for both military and non-military security
purposes, if the application of Community
rules would oblige a Member State to disclose information prejudicial
to the essential interests of its security".
9.26 The IC then examines the Conditions of Application.
It notes that Council Decision 255/58 itself does not provide
for automatic application of the exemption and that the Court
has confirmed, on several occasions, that Article 296 EC does
not introduce an automatic exemption in the field of defence.
Items on the 1958 List can be exempted "if, and only if,
the conditions for the use of Article 296 TEC are fulfilled".
The provision whereby Member States can take measures they consider
necessary for the protection of their essential security interests
has been acknowledged to grant to Member States a broad degree
of discretion: but "necessary for the protection …"
also demonstrates that this discretion is not unfettered. The
very existence of Article 298 EC, which lays down a special procedure
to be followed in the event of possible improper use of Article
296 EC, confirms that Member States do not have absolute freedom
in their decision to exempt a specific procurement contract from
the rules of the Internal Market. On the contrary, ECJ case law
has determined that it is for the Member State which seeks
to rely on Article 296 EC to furnish evidence that the exemptions
in question are necessary for the protection of the essential
interests of its security.
9.27 Moreover, the only objective justifying the
exemption is protection of a Member State's essential security
interests:
"Other interests, in particular industrial and
economic interests, although connected with the production of
and trade in arms, munitions and war material, cannot justify
by themselves an exemption on the basis of Article 296(1)(b) TEC.
Indirect non-military offsets, for example, which do not serve
specific security interests but general economic interests, are
not covered by Article 296 TEC, even if they are related to a
defence procurement contract exempted on the basis of that Article".
9.28 Member States' security interests should also
be considered from a European perspective, particularly the development
of the CFSP and the ESDP and Member States' shared objective of
developing a common Defence Equipment Market and a competitive
Defence Industrial and Technological Base. They should take this
into account when assessing whether the application of EC procurement
rules, which are aimed at fostering intra-European competition,
would undermine the essential interests of their security.
9.29 Moreover, Article 296 EC and the relevant case
law refers not to the protection of security interests in general,
but to the protection of essential security interests: "the
particularly strong wording ("essential") limits possible
exemptions to procurements which are of the highest importance
for Member States' military capabilities".
9.30 Against this background, the IC then considers
How to apply Article 296b EC. Acknowledging that it is
Member States' prerogative to define their essential security
interests and their duty to protect them, the Commission says
that although the concept of essential security interests gives
them flexibility in the choice of measures to protect those interests,
they also have "a special responsibility to respect their
Treaty obligations and not to abuse this flexibility [and]…
must in particular keep in mind that the derogation under Article
296 TEC is only applicable in clearly defined cases and make sure
that it does "not go beyond the limits of such cases".
The only way for Member States to reconcile their prerogatives
in the field of security with their Treaty obligations is "to
assess with great care for each procurement contract whether an
exemption from Community rules is justified or not. Such case-by-case
assessment must be particularly rigorous at the borderline of
Article 296 TEC where the use of the exemption may be controversial".
Contracting authorities have to evaluate:
— Which
essential security interest is concerned?
— What is the connection between this security
interest and the specific procurement decision? and
— Why is the non-application of the Public
Procurement Directive in this specific case necessary for the
protection of this essential security interest?
9.31 Moreover, given that Article 296(1)(b) EC stipulates
that measures taken under this Article "shall not adversely
affect the conditions of competition in the common market regarding
products which are not intended for specifically military purposes",
Member States must make sure that offset arrangements related
to defence contracts covered by Article 296(1)(b) EC — and
in particular indirect, non-military offset — respect this
provision.
9.32 Finally, the IC says that, while the Role
of the Commission is not to assess Member States' essential
security interests, nor which military equipment they procure
to protect those interests, as guardian of the Treaty it may verify
whether the conditions for exempting procurement contracts on
the basis of Article 296 EC are fulfilled. In such cases, Member
States must furnish evidence that, under the specific conditions
of the procurement at issue, application of the Community Directive
would undermine the essential interests of its security. General
references to the geographical and political situation, history
and Alliance commitments will not suffice.
If measures taken under Article 296 distort
competition, the Commission and the Member States concerned will
examine how these measures can be adjusted to the rules laid down
in the Treaty. The Commission may also bring the matter directly
before the Court if it considers that a Member State is making
improper use of the powers provided for in Article 296 EC; and
the burden of proof that an exemption is justified lies with Member
State. In evaluating possible infringements, the Commission will
"take into account the specific sensitivity of the defence
sector".
9.33 In parallel, the Commission will continue its
preparatory work on a possible procurement directive for military
equipment to which Article 296 EC does not apply.
The Government's view
9.34 In his 30 January 2007 Explanatory Memorandum
and accompanying letter, the Minister for Defence Procurement
at the Ministry of Defence (Lord Drayson) says that, although
there was no requirement for consultation, Member States were
provided with the opportunity to comment on an early working draft,
on the basis of which he consulted widely, both across the relevant
Government stakeholders and industry in conjunction with the Defence
Industries Council.
9.35 He notes that the IC is a non-legislative measure
and does not modify the existing legal framework: "the objective
of the Commission's Interpretative Communication is to prevent
possible misinterpretation and misuse of Article 296 TEC in the
field of defence procurement in order to make the use by Member
States of this Article more consistent".
9.36 He continues as follows:
"Although the Government shared the Commission's
objective of eliminating the mis-application of Article 296, we
also saw the need to modernise the way in which its terms were
applied — else we would be prevented from protecting the
United Kingdom's essential interests of security with respect
to technologies and capabilities invented or developed since the
1958 list of qualifying equipments was drawn up. Following representations
to the Commission, the Interpretative Communication now makes
clear that the 1958 list of defence equipments used to justify
a derogation under Article 296 TEC should be interpreted in a
way that recognises developments in technology since the list
was drawn up (e.g. such that software associated with equipment
on the 1958 list is allowable); the different practices now employed
to procure such items ('modern, capability-focused acquisition
methods'); and the inclusion of contracts for related services
and works. This clarification (which has the practical effect
of updating the list, but more flexibly than adding to it) is
very welcome.
"We assess that the Commission's Interpretative
Communication does not have any direct policy implications for
the United Kingdom as we believe that the United Kingdom already
complies with the Commission's interpretation of the correct use
of Article 296 TEC. We have traditionally competed the majority
of our requirements (even where Article 296 has been invoked)
and have openly advertised the majority of our contract opportunities
in the Defence Contracts Bulletin.
"We do not foresee the IC having any impact
on our implementation of the Defence Industrial Strategy, given
that the objective of the DIS (to retain for national security
purposes the appropriate level of operational sovereignty over
key military capacities and capabilities) is consonant with the
purpose of Art.296. Neither do we anticipate the IC hindering
our ability to procure defence equipment from the United States
or elsewhere in the world in order to meet our defence capability
requirements.
"The UK defence industry considers the IC to
be a reasoned clarification document which is an appropriate reading
of the Treaty and case law. However they do have concerns about
the Commission's views on indirect offsets[45]
— not because of the Commission's interpretation (the legal
case is unarguable) but because of the friction between this interpretation
and what industry observes in practice. They are concerned that
by highlighting the issue there are potentially a number of drawbacks
and potential consequences for the European defence industry,
ranging from reduced procurement expenditure in some Member States
through to the ability to compete against non-EU defence industrial
competitors. They intend to wait to see how this interpretation
will operate in practice and whether the issues will be covered
in any proposals for a defence directive.
9.37 He notes that, as there is neither new regulation
nor any change in policy brought about by this document, a Regulatory
Impact Assessment is not envisaged.
9.38 He also notes that the financial implications
are uncertain at this stage: "for the EU — not determined,
but hoped for as beneficial in terms of being better able to attain
value for money given the positive impact of increased competition
in the European Defence Equipment Market. For the UK — nil,
given that UK policy and procedures are already in line with the
guidance provided in this document".
Conclusion
9.39 We have no qualms about the objectives of
the IC, since it is plain that too much advantage has been taken
over many years of the provisions of Article 296 EC, to the detriment
of both overall European defence competitiveness and European
taxpayers. However, we are far from sure that the case has been
made for a defence procurement directive.
9.40 Having gone to the lengths of producing the
IC, and given the newness of the EDA Code of Conduct, the least
that could have been expected from the Commission is an explanation
as to why it is not preferable first to allow this complementary
system time to demonstrate its efficacy, or otherwise. Given the
views expressed by his Ministerial colleague in the debate on
the Green Paper two years ago, we are surprised that the Minister
says nothing about this.
9.41 Instead, we understand that the Commission
intends to produce a draft directive on defence procurement and
a regulation on intra-EU defence transfers, perhaps as soon as
this autumn. We should accordingly be grateful if the Minister
would let us know:
— what
his understanding is of what the Commission now proposes to produce,
and over what timescale?
— why he has not instead pressed the
Commission to allow the IC + EDA Code of Conduct system time to
demonstrate its potential?
— what his assessment is of the effectiveness
of the EDA Code of Conduct thus far? and
— if he continues to subscribe to the
position set out by the Minister for the Armed Forces in the debate
two years ago, or if the Government's views have changed; and
if so, how and why.
9.42 In the meantime, we shall retain the document
under scrutiny.
36 (24451) 8484/03: HC63-xxiii (2002-03), para 22 (4
June 2003). Back
37
In accordance with paragraph 2 of this Article, a list of products
to which the provisions of paragraph 1 apply was adopted by the
Council in 1958. Back
38
In 1976, the Defence Ministers of the European NATO nations (except
Iceland) established a forum for armaments cooperation, the Independent
European Programme Group (IEPG). In 1992, the Defence Ministers
of the 13 IEPG countries transferred its functions to the Western
European Union - hence WEAG (Western European Union Armaments
Group), managed by the National Armaments Directors of all the
13 nations, and accountable to those Defence Ministers. Back
39
The four-member OCCAR (Organization for Joint Cooperation in Armaments,
known by its French acronym OCCAR; Organisation conjointe de Coopération
en matière d'Armément) was established in1996 by
the Defence Ministers of Germany, Italy, France and the UK. OCCAR
encourages States to conduct collaborative programmes, improve
efficiency and develop and purchase common equipment as cost-effectively
as possible, with the aim of improving the competitiveness of
the European defence technological and industrial base. Back
40
(25696): HC42-xxii (2003-04), para 4 (9 June 2004) Back
41
Joint action to set up a European Defence Agency (EDA), adopted
by the Council on 12 July 2004. Back
42
Stg Co Deb, European Standing Committee B, 8 February 2005, Col
5. Back
43
See http://www.eda.europa.eu/edemregime/edemregime.htm for full
details. Back
44
Directive 2004/18/EC of the European Parliament and of the Council
of 31 March 2004 on the coordination of procedures for the award
of public works contracts, public supply contracts and public
service contracts. Back
45
Article 296 (1) (b) states "…such measures as it considers
necessary for the protection of the essential interests of its
security which are connected with the production of or trade in
arms, munitions and war material; such measures shall not adversely
affect the conditions of competition in the common market regarding
products which are not intended for specifically military purposes".
The Commission is concerned that indirect offsets may have an
impact in the civil market. Back
| 
