[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 17.10.2008

COM(2008) 658 final

Proposal for a

COUNCIL DECISION

issuing directives to the Commission for the re-negotiation of the Agreement between the European Atomic Energy Community (Euratom) and the Government of Canada for cooperation in the peaceful uses of atomic energy

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. Introduction

The Agreement between the European Atomic Energy Community (Euratom), hereinafter referred to as "the Community", and the Government of Canada for cooperation in the peaceful uses of atomic energy was signed in 1959[1]. An increased relationship between the Community and Canada has required a continuous update of the Agreement in order to provide a more stable and administratively effective legal framework for this cooperation. Consequently, the Agreement was amended several times[2].

The existence of this bilateral cooperation framework is relevant for the EU. Indeed, Canada is the world’s largest uranium producing country (23 % of world production in 2007), and it has been for years the main supplier of natural uranium to the EU, accounting for 20–25 % of EU supplies. Canadian uranium production is set to increase further as a result of ongoing mine development and exploration activity, and the EU industry is a major shareholder in many of the uranium mines in Canada.

In addition, the Canadian nuclear industry is an important supplier of uranium conversion services and reactor technology to the EU.

The Agreement concerns mainly the supply of nuclear material and exchange of information. It also covers the procurement of equipment and devices, the use of intellectual property rights as well as access to and use of equipment and facilities. Through the 1991 amendment, its scope was completed by including the transfer and use of tritium and related equipment, necessary for the fusion research programme of the Community.

Articles and amendments related to trade of nuclear items contain several important provisions that ensure necessary framework of the bilateral cooperation, in particular by

- ensuring that both the Community and the Government of Canada undertake that re-exports of nuclear material and equipment as well as their derivatives, are subject to peaceful uses;

- committing the Community, its Member States and the Government of Canada to non-proliferation and defining nuclear non-proliferation conditions governing transfers of nuclear material;

- recognising the role of the International Atomic Energy Agency and taking into account the commitments of both Parties towards the mentioned Agency and its derived International Conventions.

Besides this Agreement, a technical agreement[3] between both Parties was signed on the same date. Its aim was to establish a joint research and development programme centred on heavy water reactors. The validity of this technical agreement ended on 31.12.1964. Cooperation in nuclear research is now ongoing within the framework of the Agreement signed by the Community and Canada in 1998[4].

2. The difficulties encountered in the application of the Agreement

While the Agreement covers most fields of mutual interest, the successive modifications make it uneasy to read and cumbersome to implement . In addition, the enlargement of the Community implies the review and folding-in of the new Member States' bilateral agreements with Canada to the Community – Government of Canada Agreement.

3. Current status

Since few years, the European Commission has undertaken a simplification exercise covering all legislative documents. The simplification of the Community – Government of Canada Agreement is part of this exercise.

There are several formal provisions that require revision in depth, due to their obsolete character.

Besides, due to the increasing importance of the International Conventions to which both the Community and Canada are Contracting Parties, the Agreement shall make reference to the commitments made in the framework of:

- The status of the Community, its Member States and of Canada within the IAEA, and the commitments included in the Conventions concluded under the IAEA auspices;

- the Nuclear Suppliers Group.

In this context, it should be underlined that Canada has sent a diplomatic note[5] confirming that it is in favour of such simplification, provided that additional provisions (in particular technology transfer) could be incorporated. This would permit the simplification and standardisation of Canada's nuclear relations with all EU Member States mainly by the progressive reduction or elimination of the bilateral nuclear cooperation agreements of Canada with the respective EU Member States. The inclusion of technology transfer may necessitate an annex on Intellectual Property rights. In another note[6], the Department of Foreign Affairs and International Trade of Canada informed the Commission that it will seek for a negotiating mandate from the Canadian Cabinet of Ministers to revise this Agreement to include, inter alia, provisions covering the transfer of technology and invited the Commission to seek for a similar negotiating mandate.

For the Commission, the inclusion of these new provisions are important due to the latest enlargement of the Community, where one of the new Member States - Romania - has a CANDU type reactor. The bilateral agreement between Romania and Canada comprises provisions on equipment and technology transfer, as well as contamination from their use.

Besides, technology transfer provisions are also present in Finland, Sweden and Spain bilateral agreements or administrative arrangements with the Government of Canada.

Technical discussions have taken place between the Commission and Canadian authorities (Canadian Nuclear Safety Commission) aiming to prepare the ground for possible simplifications. During these meetings, the Canadian authorities reiterated recasting that would permit the inclusion of additional provisions (mainly technology transfer and the contamination principle that are of utmost political importance for Canada).

Canada also wishes to have separate agreements related to the peaceful uses of nuclear energy on the one hand and research and development, on the other hand. This would be in conformity with the existing cooperation framework, since in practice solely tritium for fusion research and related equipment are covered by the present Agreement. Cooperation related to research and development is mainly implemented through the previously mentioned Agreement on research.

4. The main objectives of the current re-negotiation process

In view of the existing difference of scopes of the bilateral agreements between various EU Member States and Canada, it appears necessary to revise the existing Agreement and include provisions on technology transfer and contamination from technology transfer and equipment. However, the Commission believes that in order to guarantee a fair implementation, these provisions should be limited to substantial items.

The Agreement must also ensure the free movement of nuclear materials, materials, equipment and technology within the Community.

The Agreement should require that transfers of nuclear material and provisions of relevant services be carried out at market-related prices and under fair market conditions.

5. Conclusion

The Commission proposes that the Council adopts the decision hereafter, authorising the Commission to re-negotiate a comprehensive nuclear cooperation agreement with the Government of Canada in accordance with the enclosed negotiating directives.

Proposal for a

COUNCIL DECISION

issuing directives to the Commission for the re-negotiation of the Agreement between the European Atomic Energy Community (Euratom) and the Government of Canada for cooperation in the peaceful uses of atomic energy

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Atomic Energy Community, and in particular the second paragraph of Article 101 thereof,

Having regard to the existing Agreement between the European Atomic Energy Community and the Government of Canada for cooperation in the peaceful uses of atomic energy, signed in 1959 and its subsequent amendments[7];

Whereas:

6. there is a continuous development of co-operation in nuclear matters (in particular trade) between the European Atomic Energy Community and Canada,

7. the existing Agreement covers trade in nuclear materials, equipment and devices, the use of intellectual property rights, exchange of information, as well as transfer and use of tritium and related equipment for the fusion programme of the European Atomic Energy Community,

8. this existing Agreement has proved efficient in establishing a cooperation framework in the peaceful uses of atomic energy,

9. this existing Agreement was amended several times,

10. in the context of the latest technological developments, Canada and the European Atomic Energy Community would like to include new provisions to the existing Agreement, thus extending its scope of co-operation,

11. a recast version of the existing Agreement, taking into account all the above, is necessary for achieving simplification, easier implementation and further development of nuclear relations between the European Atomic Energy Community and Canada,

HAS ADOPTED THIS DECISION:

Sole Article

The Commission is hereby mandated to re-negotiate, in accordance with directives contained in the Annex, the Agreement between the European Atomic Energy Community and the Government of Canada for cooperation in the peaceful uses of atomic energy.

Done at Brussels,

For the Council

The President

ANNEX

Negotiating Directives for re-negotiation of the Agreement between the European Atomic Energy Community ( Euratom) and the Government of Canada for cooperation in the peaceful uses of atomic energy

This Agreement shall be based on the provisions of the existing Agreement between the European Atomic Energy Community (Euratom), hereinafter referred to as "the Community", and the Government of Canada for cooperation in the peaceful uses of atomic energy, signed on 6 October 1959. With the aim of simplification, it will repeal outdated provisions and consolidate the main text with its annexes. In order to respond to the most recent developments, like the enlargements of the Community, the new Agreement will also include additional provisions, considered as of utmost importance by the concerned EU Member States and the Government of Canada.

12. Simplification exercise

The main task of the simplification exercise consists of incorporating amendments to the main text, updating information and including provisions aiming to offer a better understanding of the text (for example, addition of definitions explaining terms such as "the Community" or "appropriate authority" etc.).

In the context of the recent enlargement of the Community as well as due to continuous developments in the Community - Canada cooperation, certain provisions need to be deleted or updated, such as:

(a) The enumeration of the Member States in the Preamble should be deleted. The existing Agreement makes a clear reference to the founding countries of the Community. In the context of the enlargement of the Community, the new Agreement should delete references to particular countries, unless it is of specific importance. Instead it should refer to the "Community and its Member States", when necessary.

(b) The general reference to the joint programme of research and development in the Preamble should be replaced by the reference to the cooperation agreement in research signed in 1998.

(c) The terminological definitions have to be updated as necessary.

(d) The duration of the agreement has to be reviewed. Following the agreed period of duration (for example ten years), the Agreement should be automatically renewed for equal additional periods. Termination by either Party should be possible after the initial period, with a six months notice to the other Party.

(e) The text has to be reorganised in a coherent and readable way, providing titles to the articles of the Agreement.

(f) An explicit mention of the Treaty establishing the European Atomic Energy Community (hereinafter referred as "Euratom Treaty") has to be introduced, instead of the existing reference to the "Treaty signed at Rome".

(g) The Preamble should make clear references to the Community and Canada commitments towards:

- the IAEA and the respective safeguards agreements

- the Treaty on the Non-Proliferation of Nuclear Weapons

- the Nuclear Suppliers Group

- the Agreement between Canada and the European Atomic Energy Community for cooperation in the area of nuclear research signed in 1998

(h) The Agreement should not impede a free movement of nuclear material, equipment and technology within the Community.

(i) The Agreement should require that transfers of nuclear material and the provision of relevant services be carried out at market-related prices and under fair market conditions.

13. Update of international commitments of both Parties

Transfers under the Agreement should be subject to the following conditions:

(a) Peaceful and non-explosive purposes; any use for research or development of any nuclear explosive device would be specifically excluded;

(b) The nuclear material should be subject:

14. In the Community, to the Euratom safeguards pursuant to the Euratom Treaty and to the IAEA safeguards pursuant to the following safeguards agreements, as relevant, and as they may be revised and replaced, so long as coverage as required by the Non-Proliferation Treaty is provided for:

15. The Agreement between the Community's non-nuclear weapon Member States, European Atomic Energy Community and the International Atomic Energy Agency, which entered into force on 21 February 1977 (published as INFCIRC/193)

16. The Agreement between France, Euratom Atomic Energy Community and the International Atomic Energy Agency, which entered into force on 12 September 1981 (published as INFCIRC/290)

17. The Agreement between the United Kingdom, European Atomic Energy Community and the International Atomic Energy Agency, which entered into force on 14 August 1978 (published as INFCIRC/263);

Supplemented by Additional Protocols concluded on 22 September 1998 on the basis of the document published as INFCIRC/540 (Strengthened Safeguards System, Part II) and entered into force on 30 April 2004.

18. In Canada, to the IAEA safeguards pursuant to the Agreement between Canada and the International Atomic Energy Agency for the Application of Safeguards in connection with the Treaty on the Non-Proliferation of Nuclear Weapons, which entered into force on 21 February 1972 (published as INFCIRC/164); supplemented by an Additional Protocol concluded on 24.09.1998 on the basis of the document published as INFCIRC/164/Add.1 (Strengthened Safeguards System, Part II) and entered into force on 8 September 2000.

(c) In the event of the application of any of the Agreements with the IAEA referred to in subparagraph b) being suspended or terminated for any reason within the Community or Canada, the relevant Party should enter into an agreement with the IAEA which provides for effectiveness and coverage equivalent to that provided by the safeguards agreements referred to in provisions (1) or (2) of subparagraph b), or, if that is not possible,- the Community, as far as it is concerned, should apply safeguards based on the Euratom safeguards system, which provides for effectiveness and coverage equivalent to that provided by the safeguards agreements referred to in provision (1) of subparagraph b) or, if that is not possible,- the Parties should enter into arrangements for the application of safeguards, which provide for effectiveness and coverage equivalent to that provided by the safeguards agreements referred to in provisions (1) or (2) of subparagraph b).

(d) Application of physical protection measures at levels which satisfy as a minimum the criteria set out in Annex C to IAEA document INFCIRC/254/Rev.9/Part 1 (Guidelines for Nuclear Transfers) as it may be revised; supplementary to this document, the Member States of the Community, the European Commission, as appropriate, and Canada will refer when applying physical protection measures to the recommendations in IAEA document INFCIRC/225/Rev.4 corrected (Physical Protection of Nuclear Material) as it may be revised. International transport shall be subject to the provisions of the International Convention on the Physical Protection of Nuclear Material (IAEA document INFCIRC/274/Rev.1), as it may be revised and, as soon as possible, to the IAEA Regulations for the Safe Transport of Radioactive Materials (IAEA Safety Standards Series No. TS-R-1, as they may be revised).

(e) Retransfers of any items subject to this Agreement outside the jurisdiction of the Parties shall only be made under the framework of the commitments undertaken by individual Member States of the Community and Canada within the group of nuclear supplier countries known as the Nuclear Suppliers Group. In particular, the Guidelines for Nuclear Transfers, as set out in IAEA document INFCIRC/254/Rev.9/Part 1, as it may be revised, should apply to retransfers of any items subject to this Agreement.

(f) Retransfers of tritium and equipment or technology related to tritium outside the territories of the Contracting Parties are subject to prior written consent of the relevant Party.

(g) The Agreement should not jeopardise the international obligations of the European Communities under the World Trade Organisation.

19. Inclusion of new provisions

(a) The inclusion of technology transfer can be done provided that its scope is limited to substantial items to be agreed between the Parties.

(b) The inclusion of the contamination principle[8] from equipment transferred and from equipment produced from technology transferred, provided that the scope of the latter is limited to substantial items, to be agreed between the Parties.

(c) The inclusion of technology transfer in the Agreement will affect several articles, i.e. Definitions, Scope of cooperation, international transfers, trade in nuclear materials.

(d) Inclusion of a provision requesting the written consent of both Parties prior to the enrichment of a nuclear material beyond 20 per cent in the isotope U 235 and to the reprocessing of such nuclear material subject to the Community – Government of Canada Agreement.

(e) Clearly regulating the situations when nuclear material, material, equipment and technology are no longer subject to this Agreement.

(f) Ensuring that the cooperation provided in this Agreement shall be in accordance with the Euratom Treaty and its secondary legislation, as well as with the international agreements which are in force for the Parties.

(g) Inclusion of clauses providing for procedures (consultation and arbitration) applicable in case of any dispute arising out of the interpretation or application of this Agreement.

(h) Inclusion of a provision establishing administrative arrangements.

(i) Inclusion of a provision defining actions to be taken in case of violation of the Agreement. Pending on the gravity of violations, the cooperation may be suspended or terminated in whole or in part.

(j) Inclusion of a provision on mutual consultation related with the fulfilment of the commitments under this Agreement.

(k) Inclusion of a provision for exchange of information and/or cooperation in the framework of external assistance in the field of nuclear matters (Instrument for Nuclear Safety Cooperation, Instrument For Stability, Instrument for Pre-accession Assistance, and other co-operation programmes).

[1] Agreement between the Government of Canada and the European Atomic Energy Community (Euratom) for co-operation in the peaceful uses of atomic energy signed on 6 October 1959 (OJ No.59 of 24.11.59, pp. 1165-1180)

[2] –Amendment to the Agreement in the form of an exchange of letters of 16 January 1978 (OJ L 65 of 8.3.78, pp. 16-32)

–Agreement in the form of an exchange of letters of 18 December 1981 (OJ L 27 of 4.2.82, pp. 25-30)

–Agreement in the form of an exchange of letters of 21 June 1985 (OJ C 191 of 31.7.85, pp. 3-6)

–Agreement in the form of an exchange of letters of 15 July 1991 (OJ C 215 of 17.8.91, pp. 5-8)

–Note verbal of 29 April 1996 adding Switzerland to the retransfer mechanism for tritium.

[3] Technical Agreement between Atomic Energy of Canada Limited and the European Atomic Energy Community (Euratom) concerning peaceful uses of atomic energy of 6 October 1959 (OJ No. 060, 24.11.1959 pp. 1177)

[4] Agreement between the European Atomic Energy Community and Canada for cooperation in the area of nuclear research (OJ L 346 of 22.12.1998, pp. 65–71)

[5] Note of 21 March 2007

[6] Note of 6 June 2008

[7] –The Agreement signed on 6 October 1959 (OJ No.59 of 24.11.59, pp. 1165-1180)

–Amendment to the Agreement in the form of an exchange of letters of 16 January 1978 (OJ L 65 of 8.3.78, pp. 16-32)

–Agreement in the form of an exchange of letters of 18 December 1981 (OJ L 27 of 4.2.82, pp. 25-30)

–Agreement in the form of an exchange of letters of 21 June 1985 (OJ C 191 of 31.7.85, pp. 3-6)

–Agreement in the form of an exchange of letters of 15 July 1991 (OJ C 215 of 17.8.91, pp. 5-8)

–Note verbal of 29 April 1996 adding Switzerland to the retransfer mechanism for tritium.

[8] In the context of Euratom international agreements, the term "contamination principle" is used to denote that by-products derived from the use of technology, equipment or material transferred under the agreement, are also considered as falling under the scope of the agreement.