The proposal for a regulation on the European Defence Fund, presented by the European Commission on Wednesday 13 June, takes up many points of the interinstitutional negotiating agreement on the European Defence Industrial Development Programme (EDIDP) (see EUROPE 12025). This, one might say, is a “test run” by the European Commission of the Fund – while making many changes to it.
First of all, there are changes in the budget and the duration. The European Defence Fund will therefore have €13 billion (in current prices, or €11 billion in constant prices for 2018) for the period 2021-2027 (compared with €500 million over the period from early 2019 to the end of 2020 for the EDIDP). Of that amount, €4.1 billion is for research projects and €8.9 billion for supporting development projects (see EUROPE 12013).
One major innovation is that the Commission is proposing a maximum of 5% of the financial envelope shall be dedicated to the development of disruptive technologies. One source explains that the definition of disruptive technologies used by the Commission remains voluntarily vague, as it would be “illogical” to have an over-restrictive definition of a technology which, by definition, is not yet known, citing for example quantum cryptography.
The Fund will aim to support projects selected at different stages of their life cycle (research, prototype, test phase), after the fashion of EDIDP. Nonetheless, the rates of co-funding will differ. Thus, the Union will fund up to 100% of eligible research-related costs, up to 20% maximum for the development of a prototype, and up to 80% for the testing phases (Art. 14 with Art.11).
In addition, the Commission provides a “bonus” for projects that include “significant” cross-border cooperation by SMEs and mid-cap businesses – a consortium may be granted an increase in co-funding to cover total eligible costs attributed to SMEs (Art.14.3.b). The projects that come within the framework of permanent structured cooperation (PESCO) will also receive a 10% co-funding bonus. The regulation provides for overall maximum co-founding of 30%.
Another innovation is that 25% of direct costs (such as security) will be borne by the Fund. This is good news for industries, a source close to the dossier says albeit pointing out that some industrialists would have liked more.
Eligibility criteria
Article 10 on eligibility criteria will be at the heart of negotiations, several experts say, with reference to negotiations on EDIDP (see EUROPE 11982). In substance, the entities eligible will thus be companies established within the EU or – and this is a major innovation – associated member states (European Free Trade Association and European Economic Area), not controlled by non-associated third countries.
On this last point, exemption is foreseen in some cases on condition that it is proven and guaranteed that the entity is not limited in its participation to the project, that access to sensitive data is protected, and that the result of action financed remains in the hands of the beneficiary.
On this basis, the institution provides for the possibility of its funding to be reimbursed when transfer of an intellectual property right or the granting of a licence to a third country goes against the security and defence interests of the EU (Art. 25). This is bad news for some member states including France and Sweden, one source commented, seeing this potentially as European Commission power to restrict exports.
When it comes to actions (Art.11) eligible for funding, consortia should be made up of at least three entities separate from each other, established at least in three different member states and/or associate countries.
Among the other innovations in this regulation compared with EDIDP, there is the introduction of an article specifically dedicated to ethical questions (Art.7), as well as the possibility to mitigate the investment effort with the new InvestEU Fund (see EUROPE 12035).
Welcome from future Parliament rapporteur. “The proposal for a European Defence Fund for after 2020 gives the European Union a true forward-looking perspective, an excellent initiative”, said Françoise Grossetête (EPP, France), the future Parliament rapporteur, before going on to underline that the initiative helps create “a common strategic culture”. (Original version in French by Pascal Hansens)