Brussels, 22/09/2004 (Agence Europe) - The European Commission is expected to adopt on Thursday, by written procedure, its Green Paper on defence public procurement. As previously announced (EUROPE 8 September p 17), the objective is to consult EU Member States on the need to clarify the rules in force that govern military spending, and the possibility, in the long run, of freeing up defence public procurement markets. As soon as the Commission adopts the Green Paper and once it has been published in the Official Journal of the European Communities, the interested parties, with Member States in the front line, will have four months to send their opinions to the Commission.
Military spending by Member States is presently determined by Article 296 of the EC treaty. This stipulates that Community regulation on competition applies to goods not destined for specifically military ends but it also includes derogations for spending on specifically military ends. Although the European Court of Justice in several rulings has defined the conditions for using this derogation (by outlining, for example, how its use has to be justified on a case by case basis with the objective of "safeguarding essential security interests"), Member States have a tendency to use it a little too systematically, observes the Commission. Therefore, "defence markets still remain to a large extent covered by purely national legislation".
Limits of this regulatory framework do not constitute the only obstacle to development of a European defence market. Although spending by EU Member States in this field represents a significant amount of money, EUR 160 bn annually of which 1/5 goes on military equipment, according to the Commission, this amount remains largely fragmented between the different national markets. This partitioning of the markets, to which the dominant role of the countries in this sector can be added, due to reasons of a strategic character, and national legislation, which lacks homogeneity, limit access for European industries to markets of other EU Member States, the Commission underlines.
In an effort to break down these barriers, which harm competitiveness in the European defence industry and its ability to respond to EU military capability requirements, the Commission urges two measures to be taken. The first is to "clarify" the regulatory framework in force for defence public procurement by way of an interpretative communication. This non-binding communication would allow for a broader interpretation of Article 296 of the CE treaty via the Court, which would in practice, facilitate distinctions between contracts covered by the derogations and others which are not. The advantage of this measure is that it could be adopted quite quickly.
The other less ambitious measure will see the completion of the current regulatory framework with a new specific instrument for defence public procurement. This will include a draft directive to co-ordinate the awarding of contracts, which was the case previously for public service markets such as water, energy and transport. It will establish a specific framework for contract rules covered by Article 296 of the treaty and which are not subject to derogations (goods not destined for specifically military ends) but also for contracts affected by this derogation if a Member State decides to open up to competition.
The Commission is suggesting several possibilities for elaborating this draft directive. Its field of application could therefore be delineated by a list of specific materials, in the same way as the list in the Code of Conduct for exporting EU weapons drawn up in 1998. The possibility to revert to Article 296 of the treaty and therefore employ derogations, is therefore upheld. The directive explains, however, that this derogation is applied in a clear and unambiguous fashion, such as is the case for nuclear materials. It also contains provisions on transparency, non-discrimination, announcing calls for tenders, as well as non-discrimination in selection procedures.