The European Commission today proposed a new directive to enhance openness and transparency in European Union defense markets by introducing specific rules for defense procurement.
Up until now, most defense procurement contracts were exempted from the rules of the open competition-based European Single Market on the basis of Article 296 of the EU Treaty.
This practice hampers the openness of defence markets between Member States. The same problem exists for sensitive non-military security equipment (based on Article 14 of the current procurement directive).
Austrian-built GD-Steyr Pandur armored personnel carrier. The European Commission today proposes a new directive to open up Europe's fragmented defense markets for competition. Photo: Austrian MoD The new directive is tailor-made for defense and security procurement. EU Member States will have at their disposal Community rules they can apply to complex and sensitive procurements without putting at risk legitimate security interests, a statement by the Commission says.
"This will make the regulatory framework for defense more efficient and improve the openness of defense and security markets between Member States."
According to the European Court of Justice, the use of exemptions under Article 296 or Article 14 must be limited to exceptional cases.
In practice, however, many Member States have used them extensively to exempt almost all defense and sensitive security procurement from the EU's Internal Market rules.
The new directive will apply to all arms, munitions and war material subject to Article 296. Only in cases where the rules of the new directive are not sufficient to safeguard Member States' essential security interests, Member States may use Article 296 to exempt the procurement of such equipment from the directive.
Whether this is the case or not must be assessed on a case-by-case basis, the EU Commission says.
In a reaction, the European Defence Agency (EDA) welcomes the efforts of the European Commission to further support the development of a true European Defense Equipment Market (EDEM).
"The Defense Package published today is complementary to the Agency’s own agenda for creating a more effective EDEM and a stronger European Defence Technological and Industrial Base (EDTIB)," the EDA states.
“Everyone is aware that sensitive issues of national sovereignty are involved in defense procurement and that has driven much of our work in this area,” said EDA Chief Executive Alexander Weis. “The European market for tanks does not operate in the same way as the market for washing machines.”
According to the EDA, "With regard to procurement, the Commission’s initiative is complementary to the EDA Code of Conduct on Defence Procurement launched in July 2006, which covers contracts placed outside EU internal market directives on the basis of Article 296 of the EC Treaty."
"The Agency believes that competition is one key tool in a larger set that includes other important initiatives such as agreements on Security of Supply and Security of Information, issues on which the EDA is currently working. Competition is not a cure-all and cooperation is in some instances more appropriate to shape the EDTIB of the future."
The Code of Conduct, to which 24 Member States now subscribe, has so far seen more than 200 contract opportunities worth some €10 billion ($14.7 billion) published on the EDA’s Electronic Bulletin Board. Without the Code of Conduct, this business would not have been opened to Europe-wide competition, the EDA says.
The first contracts under the Code of Conduct are now in the award phase, and so far there have been eight cross-border contracts awarded, worth a total of €44 million.
