Third annual report according to operative provision 8 of the European Union Code of Conduct on Arms Exports
Date: 2001-12-11
Institutions: Council of the European Union
Subjects: European Union, activity report, code of conduct, export, military equipment

11.12.2001

EN

Official Journal of the European Communities

C 351/1

(Acts adopted pursuant to Title V of the Treaty on European Union)

THIRD ANNUAL REPORT ACCORDING TO OPERATIVE PROVISION 8 OF THE EUROPEAN UNION
CODE OF CONDUCT ON ARMS EXPORTS

(2001/C 351/01)

INTRODUCTION

Discussions have also been held on certain aspects of national
policies with a view to being able to bring them closer together.

The European Code of Conduct on Arms Exports was adopted
on 8 June 1998. It builds on the common criteria for arms
exports adopted by the Luxembourg and Lisbon European
Councils in 1991 and 1992 and establishes a mechanism for
information exchange and consultation among the Member
States.

The Code sets high minimum standards for the management
of, and restraint in, conventional arms transfers by all Member
States. The European Union thus embarked on a process of
convergence of national arms export control policies.

Operative Provision 8 provides for an annual review of the
implementation of the Code, progress achieved and issues
outstanding. This document constitutes the third annual report
and reviews the third year of implementation of the Code of
Conduct.

I. REVIEW OF THE THIRD YEAR OF IMPLEMENTATION OF THE

CODE

The first annual report stated that considerable progress had
been made in a short period of time. In the second year the
Code was substantially strengthened and the first year’s
achievements consolidated. The third year was marked by the
achievement of most of the priority objectives identified in the
first and second reports and the identification of new issues
for consideration and action.

the same time,

At
the number of notified denials and
consultations has continued to increase, demonstrating not
only an intensification of the dialogue on interpretation of the
Code of Conduct at national level but also the Member States’
growing confidence in this instrument, which contributes to
the convergence of the policies and procedures on arms
exports applicable in the Member States of the European
Union.

Dialogue with non-member countries which have aligned
themselves with the Code’s principles, particularly the associ-
ated countries of Central and Eastern Europe, as well as Cyprus,
Malta and Turkey, was stepped up during the third year as a
result of new initiatives aimed at improving the application of
the Code in these countries both at legislative level and in
actual implementation by the operators concerned. Member
States welcome the fact that the Code’s principles are being
increasingly recognised and are determined to encourage that
development.

II.

STATE OF PLAY AS REGARDS THE IMPLEMENTATION OF
THE PRIORITY MEASURES IDENTIFIED IN THE FIRST AND
SECOND REPORTS

The first and second annual reports identified ten key areas
overall (four in the first report and six in the second) for
consideration and action by the Member States in the short
term, with a view to strengthening the Code and ensuring
greater transparency. Concrete achievements in some of these
areas were already detailed in the second annual report. Further
progress made in the remaining areas during the third year of
implementation of the Code is described hereafter.

Essentially identical transactions

Member States have continued their discussion on this matter
within the Working Party on Conventional Arms Exports
(COARM), with a view to developing an understanding agreed,
by all the Member States, of the concept of an essentially
identical
led to a common
approach.

transaction. Discussion has

Daily operation of the Code’s denial mechanism will result in
an accumulation of experience that will provide the basis for a
clear understanding of what is meant by an ‘essentially identical
transaction’.

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Official Journal of the European Communities

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This process will be facilitated by the adoption of a comprehen-
sive approach to assessing transactions, and by initially using
a broad interpretation of the concept of ‘essentially identical’.
The resulting consultation will provide the experience needed
to gradually evolve a more precise definition of the term.

provide feedback on its final decision to the notifying State,
irrespective of whether that decision is to grant or deny a
licence.

In order to accelerate the process further, the consulting
Member State will, to the extent compatible with national
considerations and on a confidential basis, endeavour to share
with other EU Member States,
in the context of COARM
deliberations, information on the occasions in which consul-
tations result in the conclusion that two transactions are not
essentially identical. According to the logic of the consultation
mechanism, these cases are not considered as undercuts.

Common list of non-military security and police equip-
ment

The COARM Working Party undertook to draw up a common
list of non-military security and police equipment, the export
of which should be monitored in accordance with Criterion
No 2 of the Code ‘Respect for human rights in the country of
final destination’. The Commission has now announced a
proposal for a Community mechanism for controlling exports
of non-military equipment which may be used for internal
repression.

With regard to the issue of denials issued more than three
years previously, Member States recalled that the obligation to
consult ended after three years, as laid down in the Code of
Conduct. They felt, however, that such a denial did not expire
but could be the subject of exchanges of information.

Harmonisation of national annual reports on the appli-
cation of the Code of Conduct

In the light of the fact that some of the data transmitted by
Member States, which are contained in their national annual
thus making the task of
reports, are hard to compare,
summarising the information more complex and hampering
joint efforts to achieve transparency, Member States have
undertaken to try to define a harmonised framework for
national reports, particularly as regards statistics.

To that end, a matrix containing statistical data from the
national reports of every Member State has been compiled.
This represents a further step towards achieving a harmonised
framework, thereby improving overall transparency.

Development of exchanges of information on national
control policies for the export of arms to certain countries
or regions regarded as requiring special vigilance

Coordination of the Member States’ national positions in
multilateral bodies dealing with arms export control
issues

Member States have confirmed their determination to make
headway with this dialogue. A substantial body of denials,
notified in the framework of the mechanism of the Code, is
the concrete basis for such exchanges. The exchanges have also
been supplemented by exchanges of views and information
amongst all Member States undertaken on a regular and
systematic basis within COARM, focusing on specific countries
and regions.

Coordination within the European Union was exemplary at
the United Nations Conference on the Illicit Trade in Small
Arms and Light Weapons held in New York from 9 to
20 July 2001, where the European Union was the only group
of States to submit an overall plan of action.

The EU also established a high profile at the Conference’s
preparatory committee meetings where it showed no hesi-
tation in clearly articulating its ambitions in this area with one
voice (that of the Presidency).

Harmonisation of the procedures implemented in the
framework of the Operative Provisions of the Code

Member States have continued harmonisation work initiated
immediately after the adoption of the Code of Conduct. Recent
efforts have concentrated on the effects of EU denials on
national licensing. In this context Member States have reached
an understanding that the consulting State should always

Promotion of the principles of the Code of Conduct in
non-member countries

The European Union and the Member States continue to
encourage other arms-exporting countries to subscribe to the
principles of the Code.

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Official Journal of the European Communities

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On 18 December 2000 the European Union and the United
States issued a declaration on the responsibilities of States and
on transparency regarding arms exports. In that declaration
the EU and the United States stated that they shared a common
vision on the question of arms export controls, and that they
had decided to work jointly to encourage all arms-exporting
countries to adopt the principles and degree of transparency
they applied to their own exports. They agreed that they had
special responsibilities in that respect. Accordingly,
they
would continue to promote those principles with rigour and
seriousness of purpose.

Conduct has been addressed by the COARM Working Party.
In post-conflict areas, certain types of controlled equipment
can make important contributions to the safety of the civilian
population and to economic reconstruction. Member States
have come to the conclusion that such exports are not
inconsistent with the EU Code of Conduct. These exports, like
all others, must be dealt with on a case-by-case basis, taking
full account of the criteria set out in the Code. Member States
will require adequate safeguards against misuse of such exports
and, where appropriate, provisions for repatriation of the
equipment.

In the context of the United Nations Conference on the Illicit
Trade in Small Arms and Light Weapons held in New York
from 9 to 20 July 2001, the application of export criteria was
one of the European Union’s priorities, and on numerous
occasions the European Union stressed the European Code of
Conduct, which has, be it said, a scope wider than small arms
and light weapons alone.

On 21 and 22 February a seminar on conventional arms
exports was held in Phnom Penh within the framework of the
Association of South-East Asian Nations (ASEAN) Regional
Forum (ARF).

Moreover, two seminars on arms exports were held to brief
the associated countries on European Code of Conduct
practices, one in Warsaw in January 2001 and the other in
Nicosia in June 2001.

The political dialogue meetings held at COARM expert level in
a troika composition with the associated countries, the EFTA
countries that are members of the European Economic Area,
Russia and Ukraine are also suitable forums for discussion of
the usefulness of the Code of Conduct principles.

III.

FURTHER QUESTIONS ADDRESSED BY THE COARM WORK-
ING PARTY IN CONNECTION WITH THE IMPLEMENTATION
OF THE CODE OF CONDUCT

Member States have continued their efforts to upgrade and
harmonise the arrangements for implementing the Code of
Conduct mechanism in the following areas:

Export of equipment for humanitarian purposes

Control of arms brokering activities

In the context of the implementation of the Code of Conduct,
the issue of arms brokering was raised and was discussed on
several occasions by COARM. In accordance with the intention
expressed in the second annual report, Member States have
continued and deepened their discussions on the procedures
for monitoring arms brokering activities. To that end, they
have reached agreement on a set of guidelines for controlling
brokering that could be a basis for national legislation.

Residents and entities within the EU must be prevented from
engaging in arms transfer activities circumventing national,
European Union, United Nations or Organisation for Security
and Cooperation in Europe embargoes or export criteria of the
EU Code of Conduct on arms exports; it is also desirable to
establish the necessary tools for information exchange on
both licit and illicit brokering activities, thereby enhancing
cooperation within the EU with a view to preventing and
combating arms trafficking. Member States have thus agreed
that arms brokers resident or established within the territory
of the EU and/or brokering activities that take place within the
territory of Member States should be controlled. Such controls
should cover the activities of persons and entities who act
as agents, traders or brokers in negotiating or arranging
transactions that involve the transfer of arms and military
equipment
from one foreign country to another. These
measures will also establish a clear framework for legitimate
brokering activities.

The issue of the desirability of allowing exports of controlled
equipment for humanitarian purposes in circumstances which
might otherwise lead to a denial on the basis of the Code of

In order to prevent loopholes stemming from different national
approaches and to facilitate the work of Member States
wishing to develop or further elaborate national regulations,

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some suggestions for controls on arms brokers were evaluated
and the following conclusions were drawn.

For transactions involving the activities of buying and selling
(where the arms or military equipment enter into the legal
possession of the arms-brokering agent) or mediating (without
direct acquisition of property), a licence or written authoris-
ation should be obtained from the competent authorities in
the Member State where the brokering activities take place or
where the brokers are resident or legally established. Such
licence applications should be assessed on a case-by-case basis
against the criteria of the EU Code of Conduct on Arms
Exports.

Additionally, Member States should seriously consider regis-
tering brokers or requiring them to obtain a written authoris-
ation from the competent authorities of the Member State
where they are resident or established. In the assessment of an
application for authorisation to act as a broker, records of
involvement in illicit activities should be taken into account.
Such a system of registration or authorisation should not be
construed as implying any form of official approval of
brokering activities, a fact that is made clear also by the
maintenance of a system of individual or global
licences
authorising transactions.

Legal controls in this important area should be supported by
effective penalties. Member States could exchange information
on legislation, registered brokers and brokers who have a
history of proven involvement in illicit activities and could
continue discussions in the COARM Working Party to further
define,
inter alia, possible criteria for the assessment of
applications to register as a broker or obtain authorisation to
act as a broker.

licensing cases in which denial consultations lead to a positive
decision could be of particular use in enhancing the dialogue
on the interpretation of the criteria of the Code and thus in
promoting convergence in the field of conventional arms
exports.

Such cases might be based on developments concerning the
destination in question and/or highlight different interpret-
ations of the criteria. Member States deciding an undercut
therefore agree to share, to the extent compatible with national
considerations and on a confidential basis, information on the
undercut decision not only (as specified in the operative
provisions) with the State responsible for the relevant denial,
but, in the context of COARM deliberations, with all Member
States.

Corruption

The COARM Working Party discussed certain aspects of its
powers in connection with the problem of corruption.

Appeal procedures

The COARM Working Party discussed possible appeal pro-
cedures relating to exports of military equipment.

Certificates of final destination

The COARM Working Party began discussing the particulars
to be required in certificates of final destination.

Intangible transfers of technology

IV.

PRIORITY GUIDELINES FOR THE NEAR FUTURE

COARM endorsed the importance of considering effective
legal controls on electronic transfers of the software and
technology associated with items on the common list, which
is already done in certain Member States. It agreed to pursue
its deliberations on this issue, taking into consideration the
work done in the dual-use area.

Dialogue on undercuts

While reaffirming their support for the operative provisions
set out in the Code of Conduct, Member States feel that

The Code of Conduct and the related common list of
military equipment constitute a fundamental element in the
convergence of the policies of the Member States of the
European Union in the field of conventional arms exports.

This single approach testifies to the Member States’ concern
for preserving regional stability and promoting respect for
human rights through the implementation of high minimum
standards when examining arms export licence applications.

The Code of Conduct also provides an opportunity, through
the information exchange arrangements,
to increase and
reinforce confidence between the Member States and to
improve transparency vis-à-vis civil
society, particularly
through the publication of this third annual report.

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Official Journal of the European Communities

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Although the fundamental elements of a common approach
to the control of conventional arms exports by Member States
of the European Union may be considered to be in place,
implementation of the approach cannot be considered to have
been definitively achieved, exposed as it is to being rapidly
overtaken by events.

While the results achieved during the third year of implemen-
tation of the Code have been considerable, much remains to
be done. In particular, work needs to begin on certain areas
which have not been addressed in the past. In other areas,
further work is necessary to consolidate and build on the
results achieved, remarkable though they are.

Finally, efforts to promote the principles and criteria of the
Code of Conduct among non-member countries, which have
already yielded encouraging results, must be continued and
intensified.

Member States welcome the interest shown by the European
Parliament in the proceedings held in connection with the
Code of Conduct.

The first and second annual reports established the practice of
clearly identifying a number of guidelines on topics requiring
consideration or action in the near future, thereby enabling
the Member States and their partners within and outside the
European Union to monitor and measure progress in the
implementation of the Code.

Member States have thus identified the following guidelines:

1.

Continue efforts to increase harmonisation of national
reports and, consequently,
to produce clearer, more
transparent summary tables.

2. Agree on the definitive adoption of a system for con-
trolling exports of non-military security and police equip-
ment.

3.

4.

5.

6.

7.

Continue proceedings in the area of arms brokering on
the basis of the guidelines already approved.

Continue the proceedings on standardising the infor-
mation to appear on the certificates of final destination.

Study the problem of manufacture under licence in non-
member countries.

Begin proceedings on effective control by the authorities
of each Member State of electronic transfers of the
software and technology associated with the equipment
on the common list. The system for the control of exports
of dual-use goods could serve as a model in this respect.

Continue efforts to promote the principles and criteria of
the Code among non-member countries and international
organisations, on the basis inter alia of the Declaration
by the European Union and the United States on the
responsibilities of States and on transparency regarding
arms exports.

8. Work towards greater involvement by the candidate
States in the implementation of the Code of Conduct.

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Official Journal of the European Communities

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ANNEX I

Information on conventional arms exports and implementation of the Code of Conduct in the Member
States over the period 1 January to 31 December 2000

Statistics are compiled differently by each Member State: no uniform standard is used. Consequently, not all countries
have been able to submit this information owing to current procedures in the area of arms export controls or data
protection legislation.

A. GLOBAL STATISTICS

Country

Total value of arms exports
(in EUR)

Total number
of licences issued

Number of notified
denials

Number of bilateral
consultations initiated

Number of consultation
requests received

Austria (1)

562 545,511 (*)

Belgium (2)

779 393 408,238 (*)
192 812 922,193 (**)

Denmark (3)

30 781 000 (**)

1 542

884

160 (military equip-
ment)
76 (weapons, etc. for
civilian use)

14

16

2

0

11

0

0

2

0

23 712 900 (*)
23 485 224 (**)

149 (defence materiel) 6 (defence materiel)
58 (civilian firearms 5 (civilian firearms
and ammunition)

and ammunition)

0 1 (defence materiel)

6 (civilian firearms
and ammunition)

Finland

France

Germany (4)

Greece

Ireland

Italy

6 955 300 000 (*)
2 739 100 000 (**)

5 254 AEMG (export
licences)
4 708 CIEEMG (prior
approvals)

2 843 000 000 (*)
680 000 000 (**)

20 961 941 (*)

31 394 439,86 (*)

856 352 172 (*)
603 800 316 (**)

9 997

48

416

522 (final)
161 (temporary)
61 (renewals)

Luxembourg

94 854 (*)
92 747 (**)

Netherlands

416 600 000 (*)

not available

Portugal

22 098 957 (*)
12 726 720 (**)

Spain

138 278 830 (**)

14

229

663 (individual, glo-
bal or temporary)
349 (rectifications)

112

10

27

0

0

24

0

15

1

6

5

0

0

2

0

0

1

0

1

7

0

0

3

0

3

0

1

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Country

Total value of arms exports
(in EUR)

Total number
of licences issued

Number of notified
denials

Number of bilateral
consultations initiated

Number of consultation
requests received

Sweden

4 640 000 000 SEK (*)
4 371 000 000 SEK (**)

666

United Kingdom (5)

1 720 510 000 GBP (**) 8 371 standard indi-
vidual export licences
419 open individual
export licences

8

61

1

6

0

1

(*) Total value of licences issued.
(**) Actual value of exports.
(1)
(2) The actual value of exports refers solely to exports of arms and ammunition sensu stricto. It does not include items subject to legislation on arms also used for

Figures referring solely to exports of civilian firearms.

non-military purposes.

(3) The actual value of exports refers only to military equipment exported between 1 July and 31 December 2000.
(4) The actual value of exports refers only to war material.
(5) The identification of the value of exports is based on the classification of goods in EC Tariff Codes, which does not match the classification of goods subject to

strategic export controls. For this reason, it has not been possible to provide an accurate total value of exported goods.

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EN

Official Journal of the European Communities

C 351/9

ANNEX II

National reports on arms exports are available in paper form or on the Internet at the following locations:

Germany:

Belgium:

Denmark:

Finland:

France:

Ireland:

Italy:

Netherlands:

United Kingdom:

Sweden:

www.bmwi.de, select ‘politikfelder’, select ‘Aussenwirtschaft & Europa’,
select ‘exportkontrolle’

diplobel.fgov.be

Ministry of Foreign Affairs, N.4, Asiatisk Plads 2, DK–1448 Copenhagen K,
Denmark, or www.um.dk (the report will be available end 2001)

www.vn.fi/plm/index.html

www.defense.gouv.fr/actualités/dossier/d49/index.html

www.entemp.ie/export

Government report to Parliament on 2000 arms exports — published by
Camera dei deputati and Senato della repubblica (Doc. LXVII n. 5)

www.minez.nl

www.fco.gov.uk

www.utrikes.regeringen.se/inenglish/pressinfo/information/publications.htm