European Scrutiny Committee Contents

11 Transfers of defence-related products within the Community



+ ADDs 1-2

COM(07) 765

Draft Directive on simplifying terms and conditions of transfers of defence-related products within the Community

Legal baseArticle 95 EC; co-decision; QMV
DepartmentBusiness, Enterprise and Regulatory Reform
Basis of considerationMinister's letters of 8 and 12 December 2008
Previous Committee ReportHC 16-xi (2007-08), chapter 3 (6 February 2008) and

HC 16-xv (2007-08), chapter 1 (12 March 2008)

To be discussed in CouncilNo date set
Committee's assessmentLegally and politically important
Committee's decisionCleared


11.1 The draft Directive is one of two Directives proposed in a Commission Communication of December 2007 entitled "A Strategy for a stronger and more competitive European defence industry". The Communication was debated in European Committee on 10 March and a Directive on defence procurement which would adapt the public procurement regime set out in Directive 2004/18/EC to the award of contracts in the defence and security sectors was debated in European Committee on 24 November.

11.2 The present draft Directive aims to simplify the terms and conditions for the transfer of defence-related products within the EU by providing for general and global licences and minimising the use of individual licences. The Directive would require Member States to establish systems of general licences for transfers of defence equipment and supplies to the governments of any Member States or to other recipients in other Member States who are certified in accordance with common criteria set out in the Directive.

11.3 In our assessment of the draft Directive we shared the concern expressed by the Government that adoption of the proposal might restrict the scope for determining national policy on licence conditions and would lead to the risk that the UK would find itself no longer able to rely on Article 296EC to justify the making of bilateral agreements with third countries (including NATO Members) in relation to the licensing of exports of military equipment and supplies. In his letter of 29 February 2008 the then Minister of State for Energy at the Department for Business, Enterprise and Regulatory Reform (Malcolm Wicks) informed us that where there were essential security interests at stake, Member States would still be able to invoke Article 296EC and that where a Member State might properly do so now, the Directive would not affect the position. The Minister further explained that the danger was not so much that the Directive would change the position on external competence but rather that it would make the Commission more likely to challenge inappropriate use of Article 296EC.

11.4 We asked whether the subject-matter of the proposal might not better be dealt with by the European Defence Agency than by a proposal under the EC Treaty, but the Minister explained that the Government believed the subject was of sufficient complexity and technical detail to raise significant doubts as to whether the EDA had the capability or experience to undertake such a task and that this view was widely shared by the majority of Member States. We also asked whether any limitation on Member States' freedom to engage in intergovernmental cooperation was intended by Article 4(4) (which provided that Member States might pursue and extend existing intergovernmental cooperation "in order to achieve the objectives" of the Directive). The Minister replied that Article 4(4) was not specific enough in spelling out the entitlement of Member States to pursue and further develop intergovernmental cooperation to facilitate the restructuring and operation of the European defence industry and that it should not prevent some Member States from making specific agreements that would facilitate transfers of defence-related products between them that go beyond the Directive. The Minister added that the Government intended to seek to strengthen the text in order to preserve this form of cooperation among Member States.

11.5 In reply to our question as to the meaning of the requirement in Article 4(8) to "determine the recipients of transfer licences in a non-discriminatory way" the Minister replied that the Government was then unable to confirm the meaning of this provision, but that it seemed likely that it referred to discrimination on grounds of nationality. The Minister added that if no acceptable explanation was forthcoming, the Government would press for the deletion of this wording. On the question if any assessment had been made of the consequences of reproducing the Common Military List of the European Union, which has been adopted intergovernmentally under the EU Treaty, as an Annex to a measure adopted under the EC Treaty, the Minister stated that there was some concern over using this in the Directive, and that the Government was still considering the issue. Finally, we drew attention to the wide delegation of powers to the Commission, which would be empowered, not only to amend the list of defence-related products in the Annex, but also to amend "non-essential" parts of the Directive, with the Commission — apparently — the judge of what was essential for these purposes. The then Minister shared our concern about the potential for an increase in the powers of the Commission, and explained that the Government intended to obtain either an amendment or a deletion of the relevant provisions.

The Minister's letter of 8 December

11.6 In his letter of 8 December the Economic and Business Minister at the Department for Business, Enterprise and Regulatory Reform (Ian Pearson) provides further information on the course of the negotiations, and addresses further each of the concerns we raised in our previous report.

11.7 On the question of retaining freedom to make bilateral agreements with third countries, the Minister states that the Government is satisfied that it has achieved this objective and that it has done so by securing an amendment to Article 7, which would allow individual licensing "where it is necessary for compliance with international obligations and commitments of Member States". The reference to "international non-proliferation regimes" (and which would have limited the scope for agreements with third countries) has been deleted.

11.8 The Minister also explains that a new Article 1(3) has been added to make clear that the Directive applies subject to Articles 30 and 296EC. The Minister explains that where essential security interests are at stake, Member States will remain able to invoke Article 296EC, but that the danger is that the Commission will become more likely to challenge inappropriate use of Article 296EC. The Minister comments that the amendment "therefore does not have any legal significance but might be of some symbolic value to Member States".

11.9 In relation to Article 4(4)(which provided that Member States might pursue and extend existing intergovernmental cooperation "in order to ensure the objectives of this Directive"), the Minister informs us that the text has been amended as follows:

"This Directive does not affect the possibility for Member States to pursue and further develop intergovernmental cooperations, whilst respecting the provisions of this Directive."

11.10 The Minister comments that the Government is now satisfied that the amended text provides enough flexibility and reassurance to Member States on intergovernmental cooperation. The Minister notes in particular that the apparent limitation to existing cooperation has now been deleted.

11.11 In response to our concern over the meaning of the reference to discrimination in Article 4(8) the Minister informs us that this reference has now been deleted.

11.12 On the use of the intergovernmental Common Military List as an annex to an instrument adopted under the EC Treaty, the Minister informs us that during the meetings of the Council working group the UK highlighted the issue we raised about the potential for "cross-pillar contamination". However, the Minister also reports that these concerns did not receive any support from other Member States and that the suggestion simply to refer to the EU instrument containing the Common Military List "was ruled out on the basis of legal advice from the Commission Legal Services". The Minister adds that Article 13(1) (which contained the reference to the Common Military List) has now been amended to impose an obligation on the Commission to update the list set out in the Annex "so that it strictly corresponds to the Common Military List of the European Union", and that the UK is satisfied that this is a satisfactory way of solving the issue of defining the scope of defence-related products for the purposes of the Directive.

11.13 On the related issue of the scope of powers delegated to the Commission to amend "non-essential elements" of the Directive, the Minister states that the amendment to Article 13(1) (described above) has limited the scope of the Commission's powers and adds that the reference to amending "non-essential" parts of the Directive has been deleted.

The Minister's letter of 12 December

11.14 In his letter of 12 December the Minister provides further information on the negotiation of the proposal. The Minister explains that as a result of intensive negotiations driven by the French Presidency a first reading deal has been agreed with the European Parliament, with a vote likely in the Council later this month. The Minister also explains that the Government feels able to vote in favour of the text in view of the amendments which have been made. The Minister further reports that the reference in Article 13(2) to amending "non-essential elements" has now been re-instated. The Minister informs us that the Government supported the deletion of the reference in Article 13(2), but that it considers its re-instatement within Article 13 to be "broadly acceptable". The Minister notes that it can be argued that the delegated power of amendment under Article 13(2) relates only to the Annex referred to in Article 13(1) and is not a broader power to amend other parts of the Directive.


11.15 We thank the Minister for his two recent letters. These show that the concerns we raised have been substantially addressed.

11.16 We think that there could be some doubt over the scope of the power delegated to the Commission under Article 13(2) and that ideally this could have been more closely confined to amendments to the list mentioned in Article 13(1), but we do not consider this point to be sufficiently important to withhold clearance of the document.

11.17 We therefore clear the document from scrutiny.

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