Mr.
Davies: There has now been agreement on the security issue
that in fact very much satisfies us, but the countries that were
particularly pushing for this and that were our allies in this
connection were Italy, Sweden, the Netherlands and
Romania.
Mr.
Burns: I think from that answer that there was a
misunderstanding of the question. I was talking about not our allies,
but those member states that opposed our
position.
Mr.
Davies: It follows from my answer that those I have not
listed were either lukewarm or initially opposed, but they have decided
to withdraw their objections, because as I have explained the directive
as it has been currently brought forward is broadly satisfactory to
us.
Dr.
Murrison: On that subject, is the Minister now saying,
then, that he has succeeded in his aim of removing security from the
scope of the
directive?
Mr.
Davies: The important point is that security is a reason
for not applying the public procurement directive. I hope that the hon.
Gentleman has things the right way round when he refers to excluding
security from the directive. When we say that we are applying article
296 and the essential security interests of the nation will be at risk
if we do not apply a derogation from the public procurement directive,
we want to ensure that one of the acceptable grounds for doing that is
security—either of information, because we need to have
relationships with suppliers that we trust to be able to secure
information, or of supply, which is another aspect of
security—and we want to be certain that we can continue to get
help and support, maintenance, upgrading and so forth from particular
suppliers. Those are legitimate reasons for not applying the public
procurement
directive.
Dr.
Murrison: I am grateful to the Minister for that answer.
It is all very interesting, but the Minister in the other place said in
her letter of 21 October
that “we
have not succeeded in our key aim of removing Security from the scope
of the
Directive”. This
is a simple question for the Minister: is he saying that the Government
have now succeeded in their key aim—I emphasise, their key
aim—of removing security from the scope of the directive? Yes or
no?
Mr.
Davies: There has been a negotiation on this matter, and
inevitably in a negotiation one cannot achieve 100 per cent. of
one’s desiderata. [Interruption.] Let me complete my
answer to the
question. We
came up with an initial formulation, which we have not decided to
pursue, but we have decided that what is now available in relation to
the compromise text that is before the Committee today is satisfactory.
I repeat that we have obtained a new exemption for intelligence
activities, an exemption for contracts involving sensitive information
that, if revealed, would threaten essential security interests, and a
clarification that national security is a sole competence of member
states; it is for member states alone to define their essential
security interests. That protection is in the text, though it was
always implicit in the
system.
Dr.
Murrison: On the same point, I am sorry to have to press
the Minister, but we do not have before us the text to which he refers.
He has apologised for that, which is fine, but is he saying that what
he has just read out constitutes the burden of the text or is there
more? If so, could he describe it, for our
benefit?
Mr.
Davies: I am happy to repeat that the UK remains one of a
number of member states—it was initially a small number of
member states, and I think that I gave the hon. Gentleman that
number—that are specifically calling for the exclusion of
security from the scope of the directive, but given the lack of support
for that in the European Parliament, we have come to the conclusion
that there is no realistic prospect of achieving that primary position.
That is the position to which I just referred. We believe, however,
that the text that we now have is satisfactory, because the presidency,
the Commission and other member states have been receptive to
us in terms of our prime and necessary desiderata
in this
area.
Mr.
Burns: I return to my original question. Notwithstanding
what the position may now be, which member states did not support our
position
originally?
Mr.
Davies: The countries that particularly did not support us
in this matter were those with state police forces such as the
Gendarmerie, the Carabinieri and the Guardia Civil. Without being
indiscreet and appearing to open up here negotiations that may
sometimes have been conducted confidentially or discreetly, from what I
have just said the hon. Gentleman can guess the identities of some of
the countries
concerned.
Mr.
Burns: The Minister read out the names of three forces.
Will he confirm that only three member states did not support that
position, or tell us how many are referred to in the briefing from his
civil
servants?
Mr.
Davies: No, I cannot confirm that. I explained clearly
that the member states that initially opposed us were those with
quasi-military or paramilitary state police forces of the kind that I
described. All countries with such state police forces fall into that
category.
Mr.
Burns: I am sorry, but can the Minister’s civil
servants write him an answer quickly. Will he please tell the
Committee—I cannot see why not—which countries they were,
by name rather than by organisation? Come on,
Minister.
Mr.
Davies: I am happy to give the hon. Gentleman an answer.
If I cannot give him an answer at this moment, I will provide one very
rapidly.
Mr.
Burns: You do not know, do
you?
Mr.
Davies: I have already explained to the hon. Gentleman
that I have not been involved in the
negotiations.
Mr.
Burns: But you are the Minister
answering.
Mr.
Davies: I can tell the hon. Gentleman this: he must know
at least a few things about international negotiations and there are
always some who take the lead in opposing something, some who do not
express a view and some who express a mild view and then change their
minds.
Mr.
Burns: Give us the
names.
The
Chairman: Order. Let the Minister
respond.
Mr.
Davies: The key nations that took that line all along were
France, Italy, Spain and Portugal. The countries that supported us
strongly were the ones that I read out earlier, and the rest took an
intermediate
position.
Mr.
Hands: The Minister twice used the word
“essential” in relation to the interests of security:
once in his opening statement and once in reply to a question from my
hon. Friend the Member for Westbury. Is the word
“essential” defined at any point in the documents? Surely
there is a risk of various member states describing virtually
everything as essential to their
security.
Mr.
Davies: That is a good point. The word
“essential” appears in the foundational document in this
context—in article 296, previously article 238. The word
“essential” is essential. It is for the courts to decide
how it should be interpreted in any particular case, but it represents
a fairly high threshold. It does not mean desirable, tempting or even
useful; it means essential. It would be for the European Court of
Justice to decide in the event that the Commission decided to challenge
a particular
interpretation. However,
I must add that I have said that it is accepted in the document and
throughout the Union that it is for member states to determine in the
first instance what they consider essential. We have the right to make
our own determination in that matter, and it could be challenged only
if the Commission took a case to the European Court of
Justice.
Mr.
Hands: For the sake of clarity, if the Government
determined that a particular consideration was essential for our
national security, could it still be appealed, presumably by a foreign
contractor, in the European Court of
Justice?
Mr.
Davies: No. It could be appealed under the appeal
procedure in the directive, to which I referred, and we would uphold
our view. As we had determined that it was essential, unless we thought
that we had made a mistake, we would reject the appeal. Subsequently,
of course, nothing would prevent the Commission from
taking a case to the European Court of Justice. Theoretically, that
case could turn on the interpretation of the word
“essential”.
As I said,
there have been a number of cases over the years in which it would
clearly have been impossible for member states to argue, if they were
put up to it in the court or elsewhere, that what they were doing was
essential to their security interests. They were allowed to get away
with it. As a result, there was no jurisprudence on the matter, because
the Commission had not taken up any cases. In its communication of
2006, to which I referred, it stated explicitly that in future it would
enforce the regime as it was supposed to have existed since 1957, and
set out the guidelines that the Commission would adopt in interpreting
the then regime. It has now made the regime explicit in the document in
a new and authoritative
way.
Dr.
Murrison: May I bring us to a subject which I am
sure the Minister expected me to raise, that of reciprocity, and in
particular, the reciprocity that has been drafted in Committee by the
European Parliament? It
states: “In
the selection of candidates, contracting authorities should take into
account the need for autonomy and operational sovereignty from a
European perspective, the need to sustain European industrial and
technological pre-eminence, where this is economically valuable, and
the need for reciprocity of market access, vis-Ã -vis third
states.” What
is the Minister’s response to that? I hope he will assure me
that he will resist that because it brings into question the subject of
mutuality in the placing of contracts. I need hardly say what that
would mean in the context of US-UK trade and how incompatible it would
be with the goal of global open markets and free trade. MEPs apparently
want a reciprocity clause in order to promote what they call European
autonomy and operational sovereignty. Although the Minister might
privately have some sympathy for that position, can he assure us that
the Government will resist reciprocity in the strongest possible
terms?
Mr.
Davies: Yes, I can give the hon. Gentleman the assurance
that he seeks. We do, in principle, like the idea of a world in which
people act in a reciprocal, balanced and fair fashion. There are a
number of cases where we have had disappointments in that respect in
the area of defence contracts, and we tend to express ourselves clearly
when that occurs. With respect to the directive, we do not think the
provision proposed by MEPs would be useful. We feel that it might send
protectionist signals of the kind that the hon. Gentleman mentions,
which we would find disturbing. We certainly do not want to do that or
in any way damage our relations with third countries, one of which he
mentioned, with which we have a particularly important defence
arrangement. It is our intention to resist any such
proposal.
Dr.
Murrison: Will the Minister then confirm that ultimately
it will not be his decision or that of his Government, because the
matter will be decided by qualified majority voting by the
Council?
Mr.
Davies: The hon. Gentleman is right. This is a qualified
majority voting issue and it is being determined by the process of
co-decision. We certainly do not think we have exhausted our
negotiating leverage or influence on the
subject.
Dr.
Murrison: On the assumption that the Council insists on
the measure, which we understand is a racing certainty, what plans do
the Government have to mitigate its effect? I need hardly emphasise to
the Minister the potential implications for our indigenous industry and
our relationships with the United States and
others.
Mr.
Davies: We are working towards various compromises but I
should tell the hon. Gentleman, before he takes too pessimistic a view
of the prospects, that so far no member states have expressed a view in
favour of reciprocity. The initiative so far derives entirely from the
European Parliament.
Mr.
Jenkin: May I change the subject? I apologise for missing
the hon. Gentleman’s opening statement. Will he explain a little
more what consultations he has had with our American counterparts about
the draft directive, given that the American relationship is by far our
most important bilateral defence procurement relationship? Do they in
the United States understand what this directive means and are they
happy that we should be entering into these obligations with our
European partners, which have the potential to exclude the Americans
from some of these considerations?
Mr.
Davies: The hon. Gentleman is right that our most
important collaborative relationship in the area of defence
procurement, as in every other area, is with the United States. We have
therefore had detailed discussions with the United States and covered
the issue of reciprocity, on which I have just responded to a question
from the hon. Member for Westbury. We are determined not to allow the
directive to do any damage of the kind in question to our relationship
with the United States.
The hon.
Member for North Essex was kind enough to acknowledge that he was not
present for my introductory remarks, during which I said that we
secured, in the directive, a number of provisions of great interest and
concern to us. One of those was that member states should be allowed to
undertake joint venture relationships in the defence procurement area
with third countries. That is covered in article 8 or 9. We had our
relationships with other countries, and especially with the United
States, in view when we went into that matter. Those relationships are
now fully protected in the
directive.
Mr.
Jenkin: Does the Minister think that the directive will
advance or retard the prospects of ratifying the US-UK defence trade
treaty?
Mr.
Davies: I have no reason to suppose that it will cause the
slightest difficulty in that respect. I think our consultation with the
United States will have been regarded by our American partners as
exemplary in this context, since we have, as I said, had detailed
discussions with them. We drew their attention to the issue and took on
board their comments. I do not think that we could do more in the
context of our close collaborative relationship with the United
States.
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