Opinion of the Economic and Social Committee on the "Proposal for a Council Regulation on the establishment of the Galileo Joint Undertaking"
Date: 2001-11-28
Institutions: European Economic and Social Committee
Subjects: European Space Agency, applied research, joint venture, private sector, satellite communications

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Opinion of the Economic and Social Committee on the ‘Proposal for a Council Regulation on the
establishment of the Galileo Joint Undertaking’

(2002/C 48/08)

On 5 July 2001, the Council decided to consult the Economic and Social Committee, under Article 172
of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for
preparing the Committee’s work on the subject, adopted its opinion on 6 November 2001. The
rapporteur was Mr Bernabei.

At its 386th plenary session on 28 and 29 November 2001 (meeting of 28 November), the Economic
and Social Committee adopted the following opinion by 107 votes in favour, with four abstentions.

1. Recommendations of the Economic and Social Com-

mittee

development and deployment phases and a continuous,
systematic communication and information campaign to
promote the Galileo system and its potential applications,
starting with those already available through the EGNOS
constellation;

The Economic and Social Committee

Whereas

— the civilian Galileo European satellite radionavigation
system is important to the future global satellite navi-
gation and positioning system, and to the provision of
high-tech services to industry, business, citizens and
European society in order to make the Community
system globally competitive;

calls on the European Parliament, the Council and the Euro-
pean Commission:

— to establish as a matter of urgency the Joint Undertaking
under Article 171 of the EC Treaty, by the end of 2001
at the latest;

— there is a need for the early adoption of a joint strategy
based on a ‘dual use’ approach, with a precise mandate
and a clearly-delineated development platform for a
global approach embracing all the system’s elements and
services, as the Committee stressed in its opinion, adopted
unanimously on 12 September 2001 (1);

— to ensure that the Joint Undertaking is essentially public,
flexible, simple and of limited duration, and change the
funding structure so that only public funds are used in
order to avoid any potential conflict of
in
awarding tenders which might result from the inclusion
of private funding;

interest

— the same opinion stressed the urgent need to launch, by
the end of 2001, a Joint Undertaking under Article 171
of the EC Treaty, and subsequent creation of a European
Galileo Agency, in the most appropriate form; this action
must be speeded up in view of the security problems
which are now a top priority given the current world
situation;

— there is a need to involve the private sector from the very
outset in developing and operating the Galileo system,
both from the technical and financial point of view, by
setting up a Galileo Promotion Company to deliver on
the commitments made in the March 2001 Memorandum
of Understanding, and provide continuous back-up in the

(1) OJ C 311, 7.11.2001.

— ensure that the Joint Undertaking can absorb financial
and other endowments such as hardware and software,
in order to preserve the specific participation modes and
frameworks of each of the Joint Undertaking’s members,
particularly the European Space Agency (ESA);

— to establish in parallel with the Joint Undertaking a
public-private Galileo Promotion Company (GPC)
to
incorporate the private investment provided for in the
Memorandum of Understanding, with the majority share
being gradually ceded to private investors at the end of
the development and validation phase;

— to create two joint bodies for the Joint Undertaking and
the Galileo Promotion Company: an institutional steering
forum and a security and privacy body;

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— to provide forthwith for the Joint Undertaking to plan for
its replacement at the end of the development and
validation phase, in the shape of a European Agency or a
company under European law;

The Committee identified the following priorities for

2.4.
the strategy:

— to launch, in tandem with the Joint Undertaking and the
Galileo Promotion Company, a single strategic EU-
ESA development plan to lay down a coherent policy
framework for instruments, actions and resources to
deliver the global navigation satellite system and related
applications.

— the launch, by the end of 2001, of a Joint Undertaking
under Article 171 of the Treaty establishing the European
Community, and subsequent creation of a European
Galileo Agency founded on four pillars: an institutional
forum; a security and privacy body; a regulatory body;
and an operating body;

2.

Background

— specification of standards under the Community’s ‘new
to services, and identification of activities

approach’
generated by the Galileo system;

2.1.
The Commission proposes to introduce a Regulation
to establish, in accordance with Article 171 of the EC Treaty,
a Galileo Joint Undertaking for the purposes of research and
development and with three main tasks:

— oversee the development phase and prepare the deploy-

ment in orbit phase of Galileo;

— launch the required research and technology development
activities via the ESA and coordination of national
activities;

— mobilise the required public and private funds.

2.1.1.
The Statutes proposed by the Commission provide
for direct involvement of the Commission, the ESA and the
private sector in the Joint Undertaking, which will run the
tender procedure for overseeing the development phase of the
programme.

2.2.
The Economic and Social Committee has given its full
attention to the Galileo programme, and unanimously adopted
an own-initiative opinion on the subject on 12 September
2001.

The Committee opinion (1) stressed the need for a
2.3.
single, joint strategy for satellite communications in order to
develop a global approach embracing all the system’s elements
and services, reaching beyond satellite navigation positioning
and embedding this strategy in a ‘dual use’ approach embracing
all the Community policy responsibilities of the European
Union, the WEU and the Council’s Common Foreign and
Security Policy secretariat.

(1) OJ C 311, 7.11.2001.

— applying the appropriate measures to afford protection
of private life and of the rights to privacy and security;

— establishing alongside the Joint Undertaking a ‘Galileo
Promotion Company’ and launch of a public information
campaign to secure widespread acceptance and support
of the economic and social players and the wider public
for this cutting edge global technology which is on the
same footing as existing GPS and GLONASS systems in
terms of cooperation and competition;

— speeding up the timescales from development and vali-
dation to deployment in orbit and subsequent operation
and use by incorporating EGNOS (2) in Galileo to provide
for fast, ad hoc use of the precursor system, thus giving
an immediate impression of ‘European product reliability’
and familiarising the general public;

— ensuring cooperation and compatibility with GLONASS
and GPS and their future developments, consolidating the
Galileo frequencies at the 2003 World Radiocommunica-
tion Conference (WRC).

(2) EGNOS: the European precursor of Galileo is a satellite radio
navigation system that relies on the American GPS and Russian
GLONASS systems and ensures their integrity, i.e. it warns the
user over a very short timespan of any malfunction which might
affect the quality of the signal retransmitted by geostationary
satellites.

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3. General comments

3.1.
The Committee takes a positive view of the proposal
for a Council Regulation on the establishment of the Galileo
Joint Undertaking, which it believes is an essential step towards
securing a structured, competitive impact for the European
Galileo system, able to guarantee the independence and
integrity of the civilian operated service.

3.2.
The Committee is convinced that, once they form part
of the necessary strategic vision outlined above, the Galileo
programme and its related services can make a vital contri-
bution at global
level to the well-being of all citizens in
terms of better quality of life and promotion of personal
development, and also in terms of security and protection of
individual privacy. They will also encourage the creation of
new firms, new innovative services, new occupations and
greater economic and social cohesion.

3.3.
The Committee feels that a single strategic develop-
ment plan should be launched at European level. The plan
should contain definite structures and itineraries, and pro-
motional and support actions to raise the profile of the Galileo
system, in accordance with the EU’s policy, security and market
strategy needs. From this standpoint, the Committee feels that
the Commission’s proposals for the establishment of a Joint
Undertaking are necessary but inadequate, as they appear to
address contradictory needs and balances.

3.4.
The Committee believes that unless the Joint Undertak-
ing is simultaneously accompanied by other parallel actions, it
will be unable to guarantee the success of the operation, given
the stakes both in terms of the highly innovative competitive
development of a new, wholly European satellite navigation
and positioning system for civil purposes, and in terms
of compatibility with other extremely competitive satellite
navigation and positioning systems which have been widely
tested and are available on global markets.

The Committee believes that the Joint Undertaking

3.5.
should immediately be followed up by:

— the parallel establishment of a public-private ‘Galileo
Promotion Company’, which should
absorb the
EUR 200 million provided for in the Memorandum of
Understanding; the majority stake in the company should
be gradually ceded to private investors by the end of the
Galileo system development phase;

— the creation of two joint bodies for the Joint Undertaking
and the Promotion Company: an institutional steering
forum open to the public and private sectors, and a
security and privacy body to ensure that the requirements
of transparency, security and public protection are satis-
fied.

3.6.
The Committee believes that planning should begin
forthwith for a body such as a European Galileo Agency/Gali-
leo Company under European law to replace the Joint Under-
taking at the end of its mandate. Any uncertainty with regard
to the entity responsible for deployment and operation of the
system would damage the operational prospects of Galileo,
and give a contradictory impression of instability to a venture
which needs to be planned and constantly underpinned by
successful, positive messages.

The Galileo Promotion Company (GPC) is needed to
3.7.
enable private partners to be fully involved both technically
and financially in building up the Galileo system and in its
end-uses, whilst avoiding any potential conflicts of interest.
Furthermore, the GPC must play a key role in the Galileo
information campaign, promoting its technology and appli-
cations in the economic and social
field, and its use in
conjunction with mobile communications systems, GRID (1)
systems and other existing terrestrial and satellite networks
within a multifunctional framework.

3.8.
The Committee reiterates the fact that, in view of the
timescales for the development and validation phase (2004)
through the deployment phase (2007) to the operational phase
(2008), there is a need to develop modular phases for partial
applications using the EGNOS constellation, for air navigation
systems in particular, and backed up by a robust information
and communication campaign targeting operators and the
general public.

4.

Specific comments

4.1.
The Committee endorses the Joint Undertaking’s aim
of ensuring that Galileo has a single management structure. It
should, however, be funded solely through public funding,
including by means other than financial, such as hardware and
software endowments. The Committee also agrees that the
Joint Undertaking must have legal personality to enable it to
enter into contracts and undertake any actions needed to
conclude successfully the development and validation phase,
and pave the way for the European Agency/European Com-
pany.

(1) GRID: a single-view distributed computer/multimedia intercon-

nection system, such as UMTS.

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4.1.1.
The Committee believes that the Joint Undertaking
must be flexible and simple, in keeping with its brief and with
its limited duration. For the hardware and software it needs to
complete the development and validation phase, it should look
to outsourcing and direct non-financial
thus
avoiding the red tape which has caused considerable problems
for the Euratom Joint Undertaking in the past.

investment,

viz. an institutional steering forum open to the public
and private sectors; and a security and privacy body to
ensure that the requirements of transparency, security
and public protection are satisfied.

4.1.2. With regard to the tax regime applicable to the Joint
Undertaking, the host country must guarantee VAT exemption
on Galileo Joint Undertaking transactions.

The twelfth recital should be amended to read as
4.2.
follows:
‘The Stockholm European Council noted that the
private sector is ready to supplement the public budgets for
the development phase. The representatives of
the main
industries concerned (...) committed themselves to indicating
their contribution to the total amount of EUR 200 million for
the development phase of Galileo by subscribing to the capital
of the Joint Undertaking or contributing in some other form,
such as setting up Galileo promotion companies.’

4.3.
The fourteenth recital should read as follows: ‘The Joint
Undertaking’s main task .... by targeting existing and future
public sector funding in the form of
financial or other
endowments; in addition, it will make it possible to ensure the
management of major demonstration projects.’

The Committee suggests adding the following two new

4.4.
recitals (15 and 16):

(15) The Joint Undertaking must be flanked by a public-
private Galileo Promotion Company, as set out in the
Memorandum of Understanding. The Executive Com-
mittee will be tasked with setting and certifying expenses,
preparing the framework for expansion, development,
enhancement and maintenance of the system. The pro-
motion company will carry out the continuous infor-
mation campaign to raise the profile of the Galileo system
with operators, potential users and the public.

4.5. Annex — Statutes of the Galileo Joint Undertaking, Article 1

The second indent of 3(b) should be deleted, since
4.5.1.
the endowments in money or in kind brought in by companies
should go to the Galileo Promotion Company rather than to
the Joint Undertaking, which must remain wholly publicly
funded.

4.5.2.
Consequently, the third paragraph of point 4 should
end with ‘within a period of 30 days.’ The last sentence ‘Private
undertakings need ... 31 December 2002’ should be deleted.

4.6. Annex — Article 2

4.6.1.
should be amended to read as follows:

The second part of the first indent of Article 2(3)

— ‘it shall ensure that private undertakings which have
participated in the Galileo Promotion Company enjoy
treatment which is commensurate with a minimum pro
quota pre-emption right in becoming members of the
entity which will be responsible for the deployment and
operation of the navigation system.’

4.6.2.
reading as follows:

A fourth indent should be added to Article 2(3),

— ‘It will prepare and develop a continuous, systematic
information and communication campaign to ensure
operators and the general public can access partial but
significant applications on an ad hoc basis.’

4.6.3.
follows:

A new Article 2(4) should be added, to read as

(16) The Joint Undertaking and the Galileo Promotion Com-
pany will subsequently establish, with a view to satisfying
all appropriate coordination requirements,
two joint
consultative bodies chaired by the European Commission,

‘4.
In performing the duties set out in 1, 2 and 3, the
Joint Undertaking shall be assisted by two joint consultative
bodies in association with the Galileo Promotion Com-
pany, viz. by an institutional steering forum and a security
and privacy body, to ensure that the requirements of
transparency, security and public protection are satisfied.’

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4.7. Annex — Article 7

4.9.

Parallel establishment of a Galileo Promotion Company (GPC)

4.7.1.

Article 7 (2) should be amended to read as follows:

The Administrative Board may seek the advice of the

‘2.
institutional forum and of the security and privacy body.’

4.8. Annex — Article 8

4.8.1.
follows:

Add a new paragraph 3) to Article 8 (3), to read as

‘3.
The Administration Board shall be assisted by two
joint consultative bodies, established in conjunction with
the Galileo Promotion Company, viz. an institutional
forum representing both bodies and chaired by the Euro-
pean Commission; and a security and privacy body,
likewise representing both bodies and chaired by the
European Commission. These bodies may express opinions
on subjects referred to them by the Administration Board.
They shall run for the same term as the Joint Undertaking
and shall comprise 30 members, of which 15 shall be
appointed by the Administration Board of
the Joint
Undertaking, and 15 by the Administration Board of the
Galileo Promotion Company.’

Brussels, 28 November 2001.

The Committee recommends drafting a corporate
4.9.1.
plan for submission to the private undertakings which signed
the Memorandum of Understanding in March 2001, with a
view to creating a Galileo Promotion Company. The public
authorities and private undertakings should be on board to
launch systems for setting and certifying costs, and to frame
the system for the expansion, development, reinforcement and
maintenance of Galileo.

The company should gradually be ceded from public
4.9.2.
control to private investors who, by the end of the procedure,
should become the major shareholders in the company, whilst
technical and political control and responsibility would remain
with the public sector.

4.9.3.
The GPC should also sit on the two Joint Undertak-
ing/GPC consultative bodies, i.e. the institutional forum and
the security and privacy body, and receive their opinions on
request, or at the request of the Joint Undertaking.

4.9.4.
Finally, in addition to helping to specify the type of
services to be provided and to plan the system, the remit of
the GPC should also include active involvement
in the
information and communication campaign to back up the
Galileo system until the operational phase in 2008.

The President

of the Economic and Social Committee

Göke FRERICHS