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Explanatory Memorandum for an Agreement to Facilitate the Restructuring and Operation of the European Defence Industry

Title of Treaty

Framework Agreement between the French Republic, the Federal Republic of Germany, the Italian Republic, the Kingdom of Spain, the Kingdom of Sweden, and the United Kingdom of Great Britain and Northern Ireland concerning Measures to Facilitate the Restructuring and Operation of the European Defence Industry

Subject Matter

On 6 July 1998 the Defence Ministers of France, Germany, Italy, Spain, Sweden and the UK signed a Letter of Intent (LoI) designed to facilitate defence industry restructuring in Europe. The LoI set up six specialist Working Groups to examine the main areas where government was committed to identifying concrete proposals to remove some of the barriers to restructuring. The Framework Agreement signed on 27 July 2000 at the Farnborough Air Show consolidates the results of these Working Groups.

The Agreement creates a framework for the six nations to co-operate in this area. This is not just a matter of organisation, but also requires agreement on principles and policies that will govern co-operation between the six nations. This will lead to specific measures in a number of areas designed to help industrial and equipment co-operation. Further technical and administrative details will be recorded in subsidiary arrangements under the Agreement.

The Agreement covers:

  • Security of Supply. Parties are committed not to hinder unnecessarily the supply of defence material to the other Parties; to consult on any merger or acquisition of defence companies that may threaten security of supply; and work together on providing supplies from national stocks; priority and allocation of supplies; and reconstitution of supply facilities
  • Exports Procedures. The Agreement commits participating nations to apply simplified export licensing arrangements to transfers made in the course of joint development and production programmes and to transfers for each others’ national military requirements; and to develop lists of permitted export destinations for jointly produced military goods on a consensual, project-by-project basis. Export licensing decisions will continue to be taken according to the principles of the EU Code of Conduct on Arms Exports. The proposed arrangements will not abrogate existing national export controls.
  • Security of Classified Information; New simplified security provisions will be introduced for exchanges of classified information between countries or their defence industries that do not undermine the security of that information.
  • Treatment of Technical Information. The Agreement directs the Parties to harmonise their contracting processes for the disclosure, transfer, use and ownership of technical information to facilitate the restructuring and subsequent operation of the European defence industry.
  • Research and Technology. Co-ordination of joint research activities will be fostered to increase the advanced knowledge base and thus encourage technological development and innovation.
  • Harmonisation of Military Requirements. Parties are committed to further work on improving harmonisation of military requirements - an essential prerequisite to better equipment co-operation. It is envisaged this will lead to starting the process earlier through co-operative equipment planning to identify and formulate common military requirements with our partners rather than attempt to harmonise already mature "national" requirements.

The Agreement applies to the United Kingdom of Great Britain and Northern Ireland and will be extended to the Isle of Man.

Ministerial Responsibility

The Secretary of State for Defence has overall responsibility for the formulation and conduct of defence policy. The Minister of State for Defence Procurement supports him on matters relating to procurement, including defence industrial questions, MoD aspects of defence exports, science and technology strategy, research and equipment collaboration.

The Secretary of State for Foreign and Commonwealth Affairs has overall responsibility for the conclusion and implementation of treaty obligations and responsibility for their application to overseas territories.

Policy Considerations

  1. General

European defence companies must remain competitive on the world market to ensure their survival and commercial well being. Without consolidation and rationalisation our relative competitiveness in the global market will suffer and export markets will be lost. Industry has already started the process of consolidation, but much scope for restructuring remains. This Agreement represents commitment of the six nations to smooth the path of this process leading to a strong European defence industry.

Moreover, the six nations have concluded they must improve their ability to co-operate if their aspirations on equipment acquisition are to be affordable. This Agreement means that when we co-operate with our partners we will do so more efficiently and effectively, and that many of the obstacles which previously hindered effective equipment and industrial co-operation will be removed.

  1. Financial

There are no significant financial implications although application of individual measures may entail costs. For example, Article 10 may entail compensation arising from the amendment of existing contracts. 

  1. Reservations and Declarations

None by the UK. The Federal Republic of Germany made the following declarations on signature:

  1. As a supplement to the last recital of the preamble of the Framework Agreement, the Federal Government understands that the Agreement does not affect the obligations and commitments of defence companies resulting from European Law.
  2. In awareness of Article 16, paragraph 2 of the Framework Agreement, the Federal Government will, when exporting war weapons and other military goods of significance for a war weapon, continue in future to insist upon governmentally issued End-User Certificates.

Implementation

No legislation is required to be enacted in the UK before the treaty can be ratified.

However, this treaty is not the end of the LoI initiative. Further work by the Working Groups will be necessary on the administrative and technical details of many of the measures identified in the Framework Agreement. This subsequent work may lead to a change in legislation. For example, Article 43 commits the Parties to consider arrangements that may lead to changes in our patent law in respect of the filing on inventions.

Consultations

The Defence Industries Council welcomed the signature of the Framework Agreement as the first stage in the government response to the industrial restructuring that has already taken place in Europe.

The Isle of Man has also been consulted in respect of the application of the Agreement to the Isle of Man.

The Right Honourable Geoff Hoon
Secretary of State for Defence

Last Updated: 2 Nov 01