EU Law: Defence Transfers Directive

The European Parliament adopted, with amendments, the proposed Directive on simplifying terms and conditions of transfers of defence-related products within the Community on 16 December 2008 by 545 votes to 66, with 44 abstentions. The provisional text adopted is available at the web site of the European Parliament (P6_TA(2008)0603).

The vote was based on a report (A6-0410/2008) by the EP’s Committee on the Internal Market and Consumer Protection (IMCO), prepared by the rapporteur Heidi Rühle (Greens / ALE, DE).

The new Defence Transfers Directive is awaiting formal adoption by the Council.

After publication in the Official Journal of the European Union and entry into force, the member states have 24 months to transpose the provisions of the Defence Transfers Directive into national law, by adopting the laws, regulations and administrative provisions necessary to comply with the Directive. They then have an additional 12 months to apply the measures.

The Defence Transfers Directive applies to intra-Community transfers of defence-related products (Article 1) and these products are listed in the Annex (Article 2).


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Framework

For pedagogic reasons, we position the new Directive within the treaty framework. This comprises the legal base, i.e. the powers to legislate, and the exceptions or derogations limiting the applicability of the Defence Transfers Directive.


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Legal base

The Defence Transfers Directive is based on Article 95 (ex Article 100a) of the Treaty establishing the European Community (TEC).

Article 95 TEC allows legislative measures, adopted by co-decision, for the approximation (harmonisation) of member states’ laws, regulations or administrative actions with regard to the internal market objectives, namely the free movement of goods, persons, services and capital mentioned in Article 14 TEC.


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In the consolidated Treaty of Lisbon version of the Treaty on the Functioning of the European Union (TFEU) the corresponding Articles are 114 TFEU and 26 TFEU.


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Generally applicable derogations

According to Article 1(3) of the Defence Transfers Directive its application is subject to Articles 30 and 296 TEC.

Quantitative restrictions on imports and all measures having equivalent effect are prohibited between member states according to Article 28 TEC (ex Article 30), and the corresponding prohibition on export restrictions is contained in Article 29 TEC (ex Article 34).

Article 30 TEC (ex Article 36) then offers member states the possibility to prohibit or restrict imports or exports on certain grounds. As exceptions to (derogations from) the normally applicable treaty rules (and objectives), they have to be interpreted narrowly.

These derogations or exceptions can still be called general in the sense that they can, in principle, be applied to all sorts of exports or imports, if justified:


Article 28 TEC

Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States.


Article 29 TEC

Quantitative restrictions on exports, and all measures having equivalent effect, shall be prohibited between Member States.


Article 30 TEC

The provisions of Articles 28 and 29 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or the protection of industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.


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In the consolidated Lisbon Treaty, which may enter into force before the member states have transposed or begun to apply the Defence Transfers Directive, the corresponding provisions are found in the substantially unchanged Articles 34 to 36 TFEU, with the same grounds for exceptions:

· public morality
· public policy
· public security
· the protection of health and life of humans, animals or plants
· the protection of national treasures possessing artistic, historic or archaeological value
· the protection of industrial and commercial property


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Specific derogations

The Defence Transfers Directive does not affect the existence of Article 296 TEC (ex Article 223), with its limitations on grounds of member states’ essential security interests connected with the trade in arms, munitions and war materials, although the new Directive tries to limit the application of such specific exceptions to the free flow of goods between the EU member states:

Article 296 TEC

1. The provisions of this Treaty shall not preclude the application of the following rules:

(a) no Member State shall be obliged to supply information the disclosure of which it considers contrary to the essential interests of its security;

(b) any Member State may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war material; such measures shall not adversely affect the conditions of competition in the common market regarding products which are not intended for specifically military purposes.

2. The Council may, acting unanimously on a proposal from the Commission, make changes to the list, which it drew up on 15 April 1958, of the products to which the provisions of paragraph 1(b) apply.


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In the consolidated Lisbon Treaty this provision appears as Article 346 TFEU, without substantive change.


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Interpretative Communication on Article 296 TEC


The difficulties arising between the free movement objectives of the treaty, the essential interests of member state security connected with the production of or trade in arms, munitions and war material and the generous practices of member states to restrict the application on security and arms trade grounds are discussed in the Commission’s Interpretative Communication on the application of Article 296 of the Treaty in the field of defence procurement, Brussels, 7.12.2006 COM(2006) 779 final, available here:

http://eur-lex.europa.eu/LexUriServ/site/en/com/2006/com2006_0779en01.pdf


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Arms, munitions and war material


The TEC and TFEU refer to the list of arms, munitions and war material drawn up by the Council on 15 April 1958. It can be changed on a proposal by the Commission by unanimous Council decision.

The Defence Transfers Directive applies to its Annex List of defence-related products.


Recital 37 of the Directive expresses the desire to update the list in the Annex of defence-related products in strict conformity with the Common Military List of the European Union (CML).

The latest version of the frequently updated CML was adopted by the Council on 10 March 2008 (equipment covered by the European Union Code of Conduct on Arms Exports) (updating and replacing the Common Military List of the European Union adopted by the Council on 19 March 2007) (CFSP), published OJEU 18.4.2008 c 98/1.

This desire is given legal force in Article 13(1) of the Defence Transfers Directive.


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National concerns


Legal materials concerning the treaty background and reflecting the objectives of the Commission and the European Parliament can now be contrasted by an example of concerns expressed at national level, in this case the United Kingdom.




The UK House of Commons European Scrutiny Committee cleared the Defence Transfers Directive from scrutiny, after discussing national prerogatives, the continued scope for Article 296 derogations as well as the updating of the Annex list to define the scope of defence-related products for the purposes of the Directive:


http://www.publications.parliament.uk/pa/cm200809/cmselect/cmeuleg/19-ii/1913.htm



Ralf Grahn

EU Law: New Defence Procurement Directive

Yesterday, 14 January 2009 the European Parliament adopted the new Defence Procurement Directive, with amendments. By 597 votes in favour to 69 against with 33 abstentions, the EP overwhelmingly approved the report prepared by Alexander Graf Lambsdorff (ALDE, DE).

The new Directive concerns public contracts in the fields of defence and security, and it is based on the Commission’s Proposal for a directive of the European Parliament and of the Council on the coordination of procedures for the award of certain public works contracts, public supply contracts and public service contracts in the fields of defence and security.

The provisional adopted EP legislative resolution text is to be published during this Thursday through this web page:

http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+20090114+TOC+DOC+XML+V0//EN&language=EN

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EP press release

At the moment of writing, there is a press release, European defence and security market strengthened: deal on public contracts (14 January 2009), available here:

http://www.europarl.europa.eu/pdfs/news/expert/infopress/20090113IPR46066/20090113IPR46066_en.pdf

In addition to the main points of the Directive, the press release informs us that the adopted amendments (somewhat different from the Committee report) have been agreed with the Council.

This should set the scene for final texts and translations, formal adoption by the Council, signing by the Council and the European Parliament and publication in the Official Journal of the European Union in the near future.

After that the member states of the European Union have to adopt the laws and regulations necessary to implement the new Directive.


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Committee report
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The vote of the European Parliament was based on the report by the Committee on the Internal Market and Consumer Protection, prepared by the Rapporteur Alexander Graf Lambsdorff. The Report A6-0415/2008, including the proposed amendments, is available here:

http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+REPORT+A6-2008-0415+0+DOC+PDF+V0//EN&language=EN


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Commission’s Defence package

As we have seen in earlier posts, the Commission’s Defence package consisted of three main parts. There was the Communication on the European defence industry COM(2007) 764 final. Then there was the proposed Directive on intra-Community transfers of defence products COM(2007) 785 final, adopted with amendments by the European Parliament 16 December 2008 and set to be published in the Official Journal of the European Union this spring.

Proposal: Defence Procurement Directive

The third main ingredient was the proposed Directive on the coordination of procedures for the award of certain public works contracts, public supply contracts and public service contracts in the fields of defence and security, Brussels, 5.12.2007 COM(2007) 766 final, available here:

http://ec.europa.eu/enterprise/defence/defence_docs/COMM_2007_0765_F_EN.pdf


The Commission’s five page press release Commission proposes enhancing openness and transparency in EU defence markets (Brussels, 5 December 2007 MEMO/07/547) offers a quick overview of the proposal:

http://ec.europa.eu/enterprise/defence/defence_docs/MEMO-07-547_EN.pdf

The proposed Defence Procurement Directive would apply specifically to the procurement of arms, munitions and war material, as well as related works and services within the European Union. At the same time, member states could also use it for certain particularly sensitive non-military procurements in areas such as protection against terrorism, where contracts often have similar features to defence contracts.

Procurement of non-sensitive and non-military equipment would still be covered by the current Public Procurement Directive 2004/18/EC, even if it is procured by awarding authorities in the field of defence and security.

The proposed Defence Procurement Directive – like the general Procurement Directive 2004/18/EC – wouldl apply subject to Article 296 of the Treaty establishing the European Community (TEC), which means that Member States can still exempt defence and security contracts if this is necessary for the protection of their essential security interests.

(For a discussion on secret contracts and security concerns evoked by Article 14 of the Procurement Directive, you can read the blog post EU Procurement Directive: Secret contracts and security measures, 13 January 2009. The Article 10 exclusion of defence contracts was discussed in the 3 January 2009 blog post EU Law: Defence procurement.)


The Commission’s proposal was accompanied by two Staff Working Documents. The first was an impact assessment. For the legally minded, the discussion about Article 296 TEC and Article 14 of the Procurement Directive is of interest. The 99 page impact assessment is available here:

http://ec.europa.eu/internal_market/publicprocurement/docs/defence/impact_assessment_en.pdf

The second Commission Staff Working Document was an interpretative communication on the application of Article 296 TEC and an impact assessment summary, Brussels, 7.12.2006 SEC(2006) 1555. It is available here:

http://ec.europa.eu/internal_market/publicprocurement/docs/defence/summary_en.pdf


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With the adoption of the new Defence Procurement Directive the European Union takes a step towards enhanced security for its citizens and better use of taxpayers’ money through at least some internal market benefits in the field of public contracts relating to defence and security.



This blog will return to the Defence Procurement Directive, but before that we are going to look at the contents of the other Directive, the one on defence equipment transfers within the European Union.


Ralf Grahn