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European Defence Procurement Outside the EC: European Defence Agency, OCCAR Dr. Aris GEORGOPOULOS

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 , 13-14 November 2007. OUTLINE. Background Information

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European Defence Procurement Outside the EC: European Defence Agency, OCCAR Dr. Aris GEORGOPOULOS

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  1. 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 EuropeanDefenceProcurement, Bucharest, 13-14 November 2007

  2. OUTLINE • Background Information • European Defence Agency • OCCAR • Conclusions/Food for thought Aris Georgopoulos

  3. Background Information • Preliminary Clarifications/ Terminology: • What is the definition of “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. Aris Georgopoulos

  4. Background Information • Preliminary Clarifications/ Terminology • What is the definition of “Defence Procurement”? • Stricto SensuDefence Procurement = • The acquisition of Armaments • i.e. materials intended only for military purposes (also known as war-like materials, “hard defence” materials) Aris Georgopoulos

  5. Background Information Preliminary Clarifications / Terminology Dual-use goods = Products used for both military and non-military purposes i.e. military ambulances, motorcycles, IT etc. Dual use goods do not fall within the strict definition of Defence Procurement Aris Georgopoulos

  6. Background Information • Some Figures: • 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) • Equivalent to 3% (approx.) of EU industrial output Aris Georgopoulos

  7. Background Information • Some Figures: • 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 Aris Georgopoulos

  8. Background Information • Why is there fragmentation in the European defence market? • Defence Market  Market of the tools of sovereignty • As a result  27 national defence markets • ….as opposed to one integrated European defence market Aris Georgopoulos

  9. Background Information • Arguments for more “Europe” in defence procurement: • Economic imperatives : • Need for increasing the competitiveness of European Defence firms • Need for rational use of the limited resources allocated to defence and avoidance of duplication Aris Georgopoulos

  10. Background Information • Political/strategic imperatives: • Support of the credibility of the ESDP by a healthy European defence industrial base • Bridging the capabilities gap with the US (see Kosovo) Aris Georgopoulos

  11. “Regulation” of DP at the European level • At the moment there are three fora of “regulation” of defence procurement at European level: • EU 1st Pillar (European Community) • EU 2nd Pillar (CFSP, ESDP) • At European level but outside the EU • (This Presentation focuses on 2 and 3) Aris Georgopoulos

  12. “Regulation” of DP under the 2nd Pillar of the EU • European Defence Agency (EDA) • 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. Aris Georgopoulos

  13. European Defence Agency • Membership: • 26 participating Member States (pMS) • Apart from Denmark (General opt out) • Organisation: • EDA – Legal personality • i.e. can conclude contracts on behalf of the pMS • Head of the Agency = High Representative for CFSP Aris Georgopoulos

  14. European Defence Agency • Organisation (cont): • Chief Executive = Head of EDA’s staff • Steering Board = EDA’s decision making body • 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 • → EDA is subject to the political control of the Council of Ministers (submission of regular reports). Aris Georgopoulos

  15. European Defence Agency • Organisation (cont): • Voting 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). Aris Georgopoulos

  16. European Defence Agency • General Principles: • Inclusion • - Invitation to all EU Member States to participate (not an exclusive club) • Flexibility • - This is illustrated by a look at the competences and the way they are exercised Aris Georgopoulos

  17. EDA Competences • Competences (in the area of armaments): • Promotion of European armaments co-operation • Strengthening of the European Defence Technological and Industrial Base • Enhancement of the effectiveness in European Defence Research and Technology (R&T) Aris Georgopoulos

  18. EDA Competences 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) Aris Georgopoulos

  19. EDA- Initiatives • Other Initiatives: • Code of Conduct for Armaments Procurement • Code of best practice in the Supply Chain Aris Georgopoulos

  20. EDA- Code of Conduct • Aim: • to open up defence markets of participating Member States (operational since July 2006) • Characteristics: • Voluntary • Non binding • 24 Member States participate (apart from Denmark Spain, Hungary joined in 2007) Aris Georgopoulos

  21. EDA- Code of Conduct • Field of application: • Armaments contracts of € 1 million or more where the conditions for application of Art. 296 EC are met • except for: • procurement of research and technology; • collaborative procurements; • nuclear weapons and nuclear propulsion systems, • chemical, bacteriological and radiological goods and services • cryptographic equipment Aris Georgopoulos

  22. EDA- Code of Conduct • Publicity requirement: • Contract opportunities are to be published on the electronic bulletin Board of the EDA • http://www.eda.europa.eu/ebbweb/ • So far 282 contract opportunities have been advertised (of approx value €10 billion) Aris Georgopoulos

  23. EDA- Code of Conduct • Enforcement of the CoC(?): • Only 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 securityof Article 296 EC? Aris Georgopoulos

  24. Code of Best Bractice in the Supply Chain • Aim: • Influence behaviour in the supply chain • Promote efficient and fair competition • Support the involvement of SME’s • Characteristics: • Non binding • Publicity: Companies (1st tier etc.) may advertise contract opportunities on the Electronic Bulletin Board Aris Georgopoulos

  25. “Regulation” of Defence Procurement outside the EU • Organisation for Joint Armaments Co-operation “OCCAR” • Established in 2001 • Legal Personality • Six Participating Countries: • France, Germany, Italy and the United Kingdom, Belgium and Spain Aris Georgopoulos

  26. OCCAR • Field of competence: • - management agency of defence collaborative projects between participating countries • Programmes: • A400M • TIGER • ROLAND • BOXER • FREMM • FSAF • COBRA Aris Georgopoulos

  27. OCCAR • 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) Aris Georgopoulos

  28. Food for thought • Institutional Traffic? • Some streamlining of the institutional framework of (establishment of EDA and assimilation of WEAG/WEAO) • Enforcement of the regimes? • Even if “juste retour” abandoned, work-sharing still present. Aris Georgopoulos

  29. Food for thought • 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? Aris Georgopoulos

  30. Thank You Dr Aris GEORGOPOULOS Public Procurement Research Group School of Law University of Nottingham NG7 2RD United Kingdom Tel: 0044 (0) 115 8466307 Fax: 0044 (0) 115 9515696 aris.georgopoulos@nottingham.ac.uk

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