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© OECD A joint initiative of the OECD and the European Union, principally financed by the EU European Defence Procurement Outside the EC: European Defence.

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Presentation on theme: "© OECD A joint initiative of the OECD and the European Union, principally financed by the EU European Defence Procurement Outside the EC: European Defence."— Presentation transcript:

1 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU European Defence Procurement Outside the EC: European Defence Agency, OCCAR Dr. Aris GEORGOPOULOS Public Procurement Research Group, School of Law, University of Nottingham Seminar on European Defence Procurement, Bucharest, November 2007

2 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Background Information Background Information European Defence Agency European Defence Agency OCCAR OCCAR Conclusions/Food for thought Conclusions/Food for thought OUTLINE

3 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Preliminary Clarifications/ Terminology: Preliminary Clarifications/ Terminology: What is the definition of “Defence Procurement”? Lato Sensu Defence Procurement = Lato Sensu Defence Procurement = The acquisition by the authorities in the defence sector of the various kinds of goods and services they need for performing their duties i.e. paperclips, furniture, cleaning services, tanks, submarines, Aircraft etc. i.e. paperclips, furniture, cleaning services, tanks, submarines, Aircraft etc. Background Information

4 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Preliminary Clarifications/ Terminology What is the definition of “Defence Procurement”? Stricto Sensu Defence Procurement = Stricto Sensu Defence Procurement = The acquisition of Armaments i.e. materials intended only for military purposes (also known as war-like materials, “hard defence” materials) i.e. materials intended only for military purposes (also known as war-like materials, “hard defence” materials) Background Information

5 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Preliminary Clarifications / Terminology Preliminary Clarifications / Terminology Dual-use goods = Products used for both military and non-military purposes i.e. military ambulances, motorcycles, IT etc. i.e. military ambulances, motorcycles, IT etc. Dual use goods do not fall within the strict definition of Defence Procurement Background Information

6 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Some Figures: Some Figures: Aggregate spending on defence expenditure among the EU 25: £193 billion per year (approx) Aggregate spending on defence expenditure among the EU 25: £193 billion per year (approx) Aggregate spending on Defence Equipment among EU 25: £30-40 billion per year (approx) Aggregate spending on Defence Equipment among EU 25: £30-40 billion per year (approx) Equivalent to 3% (approx.) of EU industrial output Equivalent to 3% (approx.) of EU industrial output Background Information

7 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Some Figures: Some Figures: EU aggregate Defence Expenditure less than half of the US EU aggregate Defence Expenditure less than half of the US Due to market fragmentation EU Member States should increase their expenditure to a level higher of that of the US (at least 10%) in order to achieve comparable results with the US Due to market fragmentation EU Member States should increase their expenditure to a level higher of that of the US (at least 10%) in order to achieve comparable results with the US Background Information

8 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Why is there fragmentation in the European defence market? Why is there fragmentation in the European defence market? Defence Market  Market of the tools of sovereignty Defence Market  Market of the tools of sovereignty As a result  27 national defence markets As a result  27 national defence markets ….as opposed to one integrated European defence market….as opposed to one integrated European defence market Background Information

9 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Arguments for more “Europe” in defence procurement: Arguments for more “Europe” in defence procurement: Economic imperatives : Economic imperatives : Need for increasing the competitiveness of European Defence firms Need for increasing the competitiveness of European Defence firms Need for rational use of the limited resources allocated to defence and avoidance of duplication Need for rational use of the limited resources allocated to defence and avoidance of duplication Background Information

10 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Political/strategic imperatives: Political/strategic imperatives: Support of the credibility of the ESDP by a healthy European defence industrial base Support of the credibility of the ESDP by a healthy European defence industrial base Bridging the capabilities gap with the US (see Kosovo) Bridging the capabilities gap with the US (see Kosovo) Background Information

11 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU At the moment there are three fora of “regulation” of defence procurement at European level: At the moment there are three fora of “regulation” of defence procurement at European level: 1)EU 1 st Pillar (European Community) 2)EU 2 nd Pillar (CFSP, ESDP) 3)At European level but outside the EU (This Presentation focuses on 2 and 3) “Regulation” of DP at the European level

12 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU European Defence Agency (EDA)European Defence Agency (EDA) Established by the Council (COUNCIL JOINT ACTION 2004/551/CFSP of 12 July 2004) Established by the Council (COUNCIL JOINT ACTION 2004/551/CFSP of 12 July 2004) NB The establishment of the EDA was foreseen in the Constitutional Treaty. The Member States decided (Thessaloniki EU Council meeting 2003) to move on quickly with the establishment of the EDA without waiting for the conclusion of the ratification process. “Regulation” of DP under the 2 nd Pillar of the EU

13 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Membership: 26 participating Member States (pMS) Apart from Denmark (General opt out) Apart from Denmark (General opt out)Organisation: EDA – Legal personality EDA – Legal personality i.e. can conclude contracts on behalf of the pMS Head of the Agency = High Representative for CFSPHead of the Agency = High Representative for CFSP European Defence Agency

14 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Organisation (cont): Chief Executive = Head of EDA’s staff Chief Executive = Head of EDA’s staff Steering Board = EDA’s decision making body Steering Board = EDA’s decision making body SB is composed of 26 representative (one for each pMS) (The EU Commission participates without voting rights) SB is composed of 26 representative (one for each pMS) (The EU Commission participates without voting rights) Despite its legal personality EDA is not completely independent Despite its legal personality EDA is not completely independent → EDA is subject to the political control of the Council of Ministers (submission of regular reports). European Defence Agency

15 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Organisation (cont): Voting system in the Steering Board → Qualified MajorityVoting system in the Steering Board → Qualified Majority (Unless a representative of a participating Member State declares that it intends to oppose a decision for important and stated reasons of national policy. In that case the matter may be referred to the Council which decides by unanimity). European Defence Agency

16 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU General Principles: InclusionInclusion - Invitation to all EU Member States to participate (not an exclusive club) FlexibilityFlexibility - This is illustrated by a look at the competences and the way they are exercised European Defence Agency

17 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Competences (in the area of armaments): 1.Promotion of European armaments co- operation 2.Strengthening of the European Defence Technological and Industrial Base 3.Enhancement of the effectiveness in European Defence Research and Technology (R&T) EDA Competences

18 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Collaborative Projects: There are two categories of ad hoc coll. projects: 1. Category A → (participation of all MSs is presumed - although they are not obliged to contribute) 2. Category B → (participation of all Member States is not presumed) EDA Competences

19 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Other Initiatives: Code of Conduct for Armaments ProcurementCode of Conduct for Armaments Procurement Code of best practice in the Supply ChainCode of best practice in the Supply Chain EDA- Initiatives

20 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Aim: to open up defence markets of participating Member States (operational since July 2006)to open up defence markets of participating Member States (operational since July 2006)Characteristics: VoluntaryVoluntary Non bindingNon binding 24 Member States participate (apart from Denmark Spain, Hungary joined in 2007)24 Member States participate (apart from Denmark Spain, Hungary joined in 2007) EDA- Code of Conduct

21 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Field of application: Armaments contracts of € 1 million or more where the conditions for application of Art. 296 EC are metArmaments contracts of € 1 million or more where the conditions for application of Art. 296 EC are met except for:except for: -procurement of research and technology; -collaborative procurements; -nuclear weapons and nuclear propulsion systems, -chemical, bacteriological and radiological goods and services -cryptographic equipment EDA- Code of Conduct

22 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Publicity requirement: Contract opportunities are to be published on the electronic bulletin Board of the EDAContract opportunities are to be published on the electronic bulletin Board of the EDA So far 282 contract opportunities have been advertised (of approx value € 10 billion)So far 282 contract opportunities have been advertised (of approx value € 10 billion) EDA- Code of Conduct

23 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Enforcement of the CoC(?): Only Peer PressureOnly Peer Pressure N.B. Subscribing Member States may proceed to procurment without publication for extraordinary and compelling reasons of national security Question: How different is the notion of extraordinary and compelling reasons from the essential interests of security of Article 296 EC? EDA- Code of Conduct

24 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Aim: -Influence behaviour in the supply chain -Promote efficient and fair competition -Support the involvement of SME’s Characteristics: -Non binding -Publicity: Companies (1 st tier etc.) may advertise contract opportunities on the Electronic Bulletin Board Code of Best Bractice in the Supply Chain

25 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Organisation for Joint Armaments Co- operation “OCCAR”Organisation for Joint Armaments Co- operation “OCCAR” - Established in Legal Personality - Six Participating Countries: France, Germany, Italy and the United Kingdom, Belgium and Spain “Regulation” of Defence Procurement outside the EU

26 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Field of competence: - management agency of defence collaborative projects between participating countries Programmes: -A400M -TIGER -ROLAND -BOXER -FREMM -FSAF -COBRA OCCAR

27 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Key principles: -Cost effectiveness in collaborating programmes - Harmonisation of requirements - Competitiveness - Elimination of the practice of “juste retour” -Principle of “overall multi-programme/multi- year balance” (global balance) OCCAR

28 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Institutional Traffic?Institutional Traffic? Some streamlining of the institutional framework of (establishment of EDA and assimilation of WEAG/WEAO)Some streamlining of the institutional framework of (establishment of EDA and assimilation of WEAG/WEAO) Enforcement of the regimes?Enforcement of the regimes? Even if “juste retour” abandoned, work- sharing still present.Even if “juste retour” abandoned, work- sharing still present. Food for thought

29 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Global balance easier for MSs with strong defence industrial base. Global balance easier for MSs with strong defence industrial base. How compatible are the initiatives of the EDA especially the Code of Conduct with the parallel initiatives of the Commission in this field? How compatible are the initiatives of the EDA especially the Code of Conduct with the parallel initiatives of the Commission in this field? Food for thought

30 © OECD A joint initiative of the OECD and the European Union, principally financed by the EU Thank You Dr Aris GEORGOPOULOS Public Procurement Research Group School of Law University of Nottingham NG7 2RD United Kingdom Tel: 0044 (0) Fax: 0044 (0)


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