Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions - European defence - Industrial and market issues - Towards an EU Defence Equipment Policy
Date: 2003-03-11
Institutions: European Commission
Subjects: EU industrial policy, European arms policy, European security, arms industry, arms trade, common security and defence policy, military equipment, military research

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 11.3.2003
COM(2003) 113 final

COMMUNICATION FROM THE COMMISSION
TO THE COUNCIL, THE EUROPEAN PARLIAMENT, THE EUROPEAN
ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE
REGIONS

EUROPEAN DEFENCE - INDUSTRIAL AND MARKET ISSUES

Towards an EU Defence Equipment Policy

EXECUTIVE SUMMARY........................................................................................................ 3

Introduction ................................................................................................................................ 5

1.

1.1

1.2

1.3

2.

2.1

2.2

2.3.

2.4.

3.

3.1

Recent developments strengthen the case for a European Defence equipement Policy6

Recent developments inside and outside the EU ......................................................... 6

European Armaments and industrial policies .............................................................. 7

European armaments policy and the Treaty provisions ............................................... 8

Objectives of a European Defence equipement Policy................................................ 9

Defence equipment demand....................................................................................... 10

Defence equipment supply......................................................................................... 10

Regulating the EU defence equipment market........................................................... 11

Research ..................................................................................................................... 12

Proposals for Action................................................................................................... 12

Towards a European defence equipment market. ...................................................... 13

3.1.1.

Standardisation........................................................................................................... 13

3.1.2. Monitoring of defence-related industries ................................................................... 13

3.1.3.

Intra-Community transfers ......................................................................................... 13

3.1.4. Competition policy..................................................................................................... 14

3.1.5.

Spending better in defence procurement.................................................................... 15

3.1.6.

Export Control of dual-use goods and technologies. ................................................. 15

3.2.

Towards a more coherent European advanced security research effort..................... 16

4.

4.1

4.2

4.3

5.

Themes for further reflection for the EU and Member States ................................... 17

EU Defence Equipment Agency proposals................................................................ 17

Security of supply ...................................................................................................... 18

Defence trade issues................................................................................................... 18

Conclusion ................................................................................................................. 19

2

EXECUTIVE SUMMARY

In  1996  and  1997  the  Commission  produced  two  Communications  to  encourage  industrial
restructuring  and  greater  efficiency  in  the  European  Defence  Equipment  Market.  Some  of
these ideas came to fruition. But Member States did not act in a number of essential areas –
feeling,  perhaps,  that  the  proposals  were  before  their  time.  Following  a  period  of
transformation  in  this  sector  and  in  the  institutional  framework  of  the  EU,  including  the
beginnings of a real European Security and Defence Policy (ESDP) the European Parliament,
in a Resolution of 10 April 2002, invited the Commission to present a new Communication.

These issues have been brought into sharper focus by the Convention on the future of Europe.
A  working  group  on  defence  has  made  substantive  recommendations  which  will  be  the
subject of further work over the coming months.

Strengthening the industrial and market situation of European defence companies will greatly
improve the EU’s ability to fulfil the Petersberg tasks in the accomplishment of ESDP. It will
also benefit collective defence by strengthening Europe’s contribution to NATO.

Whatever the long-term prospects for a full common European defence equipment policy, the
Commission  is  determined  to  make  progress  at  once  wherever  this  may  be  possible.  The
present Communication therefore proposes action in the following fields:

-  Standardisation:  Stakeholders  recognise  the  need  for  harmonised  European
approach to defence standardisation. The Commission is working on this issue with
CEN to assist co-operation between Ministries of Defence and  industry  to  develop,
by  the  end of  2004,  a  handbook  cataloguing  standards  commonly  used  for  defence
procurement.

- Monitoring of defence related industries: Stakeholders need a clearer picture of the
defence  industrial  and  economical  landscape  in  Europe.  To  achieve  this,  the
Communication  proposes  to  launch  a  monitoring  activity  on  defence-related
industries.

-  Intra-community  transfers:  It  has  long  been  argued  that  a  simplified  European
licence  system  could  help  to  reduce  the  heavy  administrative  procedures,  which
impede the circulation of components of defence equipment between EU countries.
The  Commission  proposes  to  launch  an  impact  assessment  study  in  2003  and,
depending  on  its  results,  start  elaborating  at  the  end  of  2004  the  appropriate  legal
instrument.

-  Competition:  Competition  improves  market  efficiency  and  protects  innovation.
Consequently, and without excluding the possibility of exceptions consistent with the
Treaty,  the  Commission  intends  to  continue  its  reflection  on  the  application  of
competition rules in the defence sector.

-  Procurement  rules:  Harmonised  procurement  rules  for  defence  equipment  would
also  increase  market  efficiency.  On  this  basis,  a  reflection  on  how  to  optimise
defence procurement at national and EU levels should be initiated in the EU. The end
goal  would  be  to  have  a  single  set  of  rules  for  procuring  defence  equipment  in
Europe. There have been several important Court judgements in recent years that are
relevant to this work - especially in helping to define the scope of Article 296. The

3

Commission will issue an Interpretative Communication by the  end of  2003 on the
implications  of  these  judgements.  In  parallel,  it  will  work  on  a  Green  Paper  which
might be issued in 2004 as a basis for discussion with stakeholders.

- Export control of dual use goods: International export control regimes exist – but in
most cases, the EC is  not  a member. The  consequence is  that  Member  States  often
adopt  uncoordinated  positions,  which  may  unnecessarily  limit  export  opportunities
for  EU  civil  industries  and  may  affect  the  functioning  of  the  internal  market  after
enlargement.  The  Communication  proposes  to  raise  this  issue  in  relevant  Council
bodies.

- Research: The Communication proposes to consult Member States and industry in
2003 to identify common needs and to  establish a security-related  research  agenda.
In this respect, the Commission intends to launch a pilot project.

The Commission has followed the debate on  a possible EU Defence Equipment Framework
overseen by an Agency (or Agencies). Such a  framework could help to co-ordinate national
collaborative programmes and provide a basis for drawing in Member States, which  are  not
presently  engaged.  Until  now,  Member  States  have  chosen  to  conduct  most  of  this  work
outside the EC Treaty, but there may also be a place for certain Community instruments and
mechanisms.

4

INTRODUCTION

In  1996  and  1997  the  European  Commission  produced  two  Communications1  on  defence-
related  industries  to  encourage  restructuring  and  the  setting  up  of  an  efficient  European
defence equipment market. Concrete proposals and actions followed with respect to some of
these issues. However, as regards the most essential reforms, Member states considered action
on the European level premature.

Following  a  period  of  considerable  change  in  the  industrial  armaments  sector  and  in  the
institutional  framework  of  the  EU,  including  developments  in  ESDP,  the  European
Parliament, in a Resolution of 10 April 2002, invited the Commission to address the issue of
armaments in a new Communication.

In autumn 2002 the Convention on the Future of Europe set up a working group on defence
chaired by the European Commissioner, Michel Barnier. The working party's report2 stressed
that the credibility of European defence policy depends on the existence and development of a
European capacity and a strengthening of the industrial and technological base of the defence
sector.

Taken together, EU Member States spend less than half of what the U.S. spends on defence3.
The  total  US  budget  comes  to  an  annual  $390  billion,  compared  to  a  cumulative  budget  of
€160 billion for EU Member States together. For many  years, defence investment in Europe
has been significantly smaller than in the USA in procurement (€40bn per annum in Europe
compared to $100bn in USA) and in research (€10bn in Europe compared to $50bn in USA).
But apart from absolute levels of spending which are necessarily a function of their respective
objectives,  Europe  yield  much  less  in  terms  of  operational  capabilities.  The  real  military
capability of EU Member States is estimated at about 10 per cent of that in the US4. This issue
has  repercussions  for  the  transatlantic  relationship.  A  reinforced  European  defence  and
technological  industrial  base  can  provide  an  important  contribution  to  collective  security  in
the  context  of  NATO  and  other  partnerships.  Taxpayers  should  get  the  most  out  of  the
investment they make in security. There is ample evidence that this is not the case at present
and that a European defence equipment market would bring significant savings in costs. It is
crucial  for  both  civil  and  defence  sectors  of  the  economy  that  we  create  an  environment  in
which  European  companies  can  give  better  value  for  money.  That  is  why  the  Commission
wishes to set the questions of arms trade and production in their industrial context. The scope
of  concern  encompasses  all  industrial  activity  in  Europe  related  to  components,  which  may
end up in civil and/or military products.

Cost  efficiency  of  defence  spending,  the  maintenance  of  a  competitive  defence  and
technological  industrial  base,  better  access  for  EU  manufactured  goods  to  third  markets,
ethics and fairness in the arms trade, security of supply, and also the need to respect Member
States prerogatives in this sensitive area are all important considerations when defining an EU
armaments5 policy.

1 
2

3

4 
5 

COM(96)10 and COM(97)583.
Final report of working group 8 on Defence: CONV461/02 dated 16 December 2002.
  Regardless  of  the  increase  in  the  US  defence  budget  from  2003  totalling  some  100  billion  $  over  a
three year period.
Cf. European Parliament Resolution of 10 April 2002.
For the purpose of this Communication synonymous with defence equipment policy.

5

                                                
On  the  military  side,  the  efficiency  of  multinational  corps  such  as  Eurocorps,  Eurofor,  and
Euromarfor requires the highest degree of interoperability of their armaments. To achieve this
in a cost-effective way, the solution would be to equip the national units that make up these
forces increasingly with the same equipment.

On the industrial side, the survival of a European defence industrial base able to support the
ESDP will depend on successful national and trans-European consolidation of the industry as
well  as  transatlantic  partnerships  between  companies.  The  currently  fragmented  legal  and
regulatory  framework  places  limits  on  the  adjustment  capabilities  of  companies  or  pushes
them  towards  strategies  and  alliances  which  put  the  Union  in  a  disadvantageous  position.
Failure to safeguard a competitive defence industrial base, and the loss of autonomous design
and  innovation  capabilities,  limits  available  choice  and  is  bound  to  lead  in  the  long  run  to
higher procurement costs.

For all  these  reasons,  there  is  a  strong  case  for  a  more  co-ordinated  EU  defence  equipment
policy. Just as the ESDP complements, national defence policies and NATO, an EU Defence
Equipment Policy would complement corresponding national policies.

One key contribution that the Commission can make in this field is in seeking to improve the
quality  of  the  EU  regulatory  framework  governing  the  treatment  of  armaments  in  Europe.
This is the purpose of the present communication.

European defence industries compete on a global market. The Commission acknowledges the
need  to  address  at  a  later  stage  some  particular  issues  such  as  the  improvement  of  the
functioning  of  the  existing  Code  of  Conduct  on  Arms  and  wider  opening  of  third  country
markets to European defence products.

1. 

RECENT  DEVELOPMENTS  STRENGTHEN  THE  CASE  FOR  A  EUROPEAN  DEFENCE
EQUIPEMENT POLICY

1.1

Recent developments inside and outside the EU

The 1999 European Councils of Cologne and Helsinki gave new impetus to European security
and defence policy through the definition of a headline goal to be achieved by 2003; and with
the  creation  of  new  EU  structures  such  as  the  Political  and  Security  Committee,  the  EU
Military Committee and the EU Military Staff. The European Capability Action Plan (ECAP),
which seeks to fill EU capability shortfalls, is likely to include off-the-shelf procurement and
collaborative programmes as well as defence research and technology measures.

A close co-operation is being established with NATO to enable the EU to have assured access
to  NATO  planning  assets  for  ESDP  operations.  Extensive  consultations  are  taking  place  in
this  context  in  order  to  ensure  maximum  compatibility  of  EU  and  NATO  concepts  for  this
purpose.

Meanwhile,  outside  the  EU  institutional  framework  there  has  been  further  substantial
restructuring of defence-related industries. Companies – faced by ever-stronger competition,
notably  from  the  US  –  are  crying  out  for  a  more  open  and  efficient  market  to  improve  the
competitiveness  of  the  European  defence  technological  and  industrial  base.  Groups  of
Member States have responded to the new challenges by entering into ad hoc agreements such

6

as the Letter of Intent (LoI)6 and its Framework Agreement which aim to facilitate industrial
restructuring;  and  the  “Joint  Armaments  co-operation  organisation”  known  as  OCCAr
(Organisme  Conjoint  de  Coopération  en  matière  d’Armement)7,  which  aims  to  improve  the
management of co-operative armament programmes.

These various initiatives in the field of European armaments trade and production need to be
underpinned by a more coherent overall framework in order to bring more legal certainty and
attract participation by a larger number of Member States.

The  recent  adoption  of  Council  regulation  (EC)  No  150/20038  suspending  import  duties  on
certain  weapons  and  military  equipment  constitutes  a  step  forward  towards  setting  up  a
European Defence Market.

These objectives have been brought into even sharper focus by the Convention on the future
of  Europe.  One  of  its  working  groups  had  a  fundamental  debate  on  defence,  and  made
substantive recommendations9 which will be the subject of further scrutiny and debate in the
course of the Convention’s deliberations over the coming months.

1.2

European Armaments and industrial policies

There is an intrinsic unity of purpose in the European Union’s internal policy, including the
Lisbon targets, and external goals to which all policies and instruments must contribute. The
Commission  considers  that  the  dynamism  of  industry  is  essential  for  Europe  to  be  able  to
sustain  and  increase  its  prosperity  while  meeting  its  wider  social,  environmental  and
international  ambitions10.  One  of  the  aims  of  its  Communication  of  11  December  2002  on
Industrial Policy in an Enlarged Europe is to place industry back on the policy agenda. A key
message is that Industrial 7Policy, while being horizontal in nature, needs to take into account
the specific characteristics and needs of every individual sector. In that context, the STAR 21
report published in  July 2002  contained  an  in-depth analysis  of the situation and  challenges
facing Europe’s aerospace sector with particular emphasis on the need to address the defence
dimension.  A  similar  exercise  concerning  maritime  industries  (LeaderSHIP  2015)  was
launched in January 2003.

In that spirit and with a view to the Spring European Council on 21 March 2003, proposals
were  made  by  the  Commission  and  also  by  Member  States  on  structural  reform  and
modernisation  in  Europe  with  a  view  to  strengthening  economic  competitiveness  and
guaranteeing  employment  opportunities  for  all.  Inter  alia,  measures  were  proposed  to  lift
barriers  regarding market  and competition  conditions, to rapidly  conclude  legislation  on  the
internal market which is currently being reviewed, with a view to obtaining results that truly
open  up  the  markets,  to  enhance  research  results  and  to  establish  clearer  links  between
research institutes and business creation.

6 

7 

8 

9 
10 

The  Letter  of  Intent  and  its  Framework  Agreement  include  six  countries  namely:  France,  Germany,
Italy,  Spain,  Sweden,  and  the  United  Kingdom.  Its  aims  at  facilitating  the  industrial  restructuring
process.
The  OCCAr  includes  four  countries,  namely:  France,  Germany,  Italy,  and  the  United  Kingdom.  This
international organisation aims at improving the management of co-operative programs.
A  Council  Regulation  on  the  basis  of  Art.  26  TEC  was  adopted  in  January  2003  suspending  import
duties on certain weapons and military equipment OJ n° L25 of 30.1.2003, p. 1.
Final report of Working Group VIII - Defence of 16 December 2002; CONV 461/02
COM (2002) 714 on Industrial Policy in an Enlarged Europe dated 11 December 2002.

7

                                                
Failure to enhance the contribution of Community policies, especially on trade, development,
internal market, research, and competition policy will result in sub-optimal solutions in terms
of  the  effectiveness  of  the  ESDP.  In  turn  failure  to  develop  a  European  dimension  to  the
defence equipment market, and to invest in research, is certain to have a negative effect on the
competitiveness  of  high  technology  enterprises.  Knowledge  and  innovation  are  essential
elements in enabling those enterprises to compete and to co-operate on an equal footing with
international competitors such as U.S. companies which themselves enjoy a far higher level of
backing of their governments.

Although some EU companies are world-class innovators, a low share of European patent and
R&D  activity  vis-à-vis  the  EU’s  main  competitors  means  that,  overall,  Europe’s  innovative
performance remains  too  weak.  These  facts  lie  behind  the  less  encouraging competitiveness
performance  of  the  EU  in  some  of  the  highest  value  added  segments  of  the  economy.
Different  measures  of  comparative  advantage  reveal  that  the  EU  tends  to  specialise  in
medium-high technology and mature capital-intensive industries. If it is essential to keep the
strengths in these sectors, which represent a higher share of total output and employment, the
EU  should  seek  to  improve  its  position  in  enabling  technologies  such  as  ICT,  electronics,
biotechnology  or  nano-technology,  where  it  often  lags  behind  its  main  competitors.
Technology-driven industries are not only a source of knowledge and technological spill over
throughout  the  economy,  they  are  also  the  ones  which  exhibit  greater  productivity  growth.
The  European  industry’s  relative  weakness  in  these  fields  as  well  as  their  low  share  in  the
economy weigh on the overall growth and productivity performance of the EU.

The  reality  is  that  a  major  contribution  to  security  and  defence  systems  now  comes  from
industries and SMEs developing their products and services primarily for civil applications.

The defence-related industries could benefit from the approach proposed in the EU industrial
policy communication.

1.3

European armaments policy and the Treaty provisions

Questions  of  trade  and  production  of  armaments  lie  at  the  intersection  of  defence  and
industrial  policies.  In  the  past,  it  has  proved  difficult  to  reconcile  industrial  and  defence
imperatives.  The  European  armaments  industry  has  suffered  as  a  consequence.  A  more
appropriate framework needs to be defined..

Over the years wide application of Art. 296 ECT  11 has led to fragmentation of markets and
industries at national level. However, it should be possible to improve the situation within the
provision  of  the  current  Treaties.  With  sufficient  will,  it  should  be  possible  to  frame  a
common set of rules on defence equipment, which will take due account of the specificities of
armaments thereby progressively limiting recourse to Article 296. Some of the rules required

11 

TEC article 296 :
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.

8

                                                
may either fall under pillar one (the EC treaty) or pillar two (Common Foreign and Security
Policy) of the EU treaty12.

2. 

OBJECTIVES OF A EUROPEAN DEFENCE EQUIPEMENT POLICY

Armament policy issues13 can be conveniently grouped under four headings:

(1) 

(2) 

(3) 

Defence equipment demand: harmonisation of the military and other security-
related  requirements  as  well  as  the  planning  and  procurement  of  defence-
related equipment.

Defence equipment supply: completion of the industrial consolidation process
(primarily the responsibility of industries themselves); supportive policies and
actions  by  the  Commission  and  Member  States  towards  the  creation  and
maintenance of a competitive industrial structure in Europe.

Defence equipment market: an appropriate  regulatory  framework  addressing
internal and external aspects; appropriate rules for cost-efficient procurement
of goods and services both by member states defence procurement Agencies
and  by  any  future  European  Agency(ies);  and  economically  efficient  export
controls.  All  this  needs  to  be  developed  while  preserving  ethical  standards
and promoting reciprocal market access.

(4) 

Research:  co-operation  and  coherence  of  defence-related  research  at
European level; exploitation of civil-military synergies.

Community action is most likely to be able to add value in the third and fourth areas above.

12 

TEU Article 17
1.  The  common  foreign  and  security  policy  shall  include  all  questions  relating  to  the  security  of  the
Union, including the progressive framing of a common defence policy, which might lead to a common
defence, should the European Council so decide. It shall in that case recommend to the Member States
the adoption of such a decision in accordance with their respective constitutional requirements.
The policy of the Union in accordance with this Article shall not prejudice the specific character of the
security  and  defence  policy  of  certain  Member  States  and  shall  respect  the  obligations  of  certain
Member  States,  which  see  their  common  defence  realised  in  the  North  Atlantic  Treaty  Organisation
(NATO),  under  the  North  Atlantic  Treaty  and  be  compatible  with  the  common  security  and  defence
policy established within that framework.
The  progressive  framing  of  a  common  defence  policy  will  be  supported,  as  Member  States  consider
appropriate, by co-operation between them in the field of armaments.
2. Questions referred to in this Article shall include humanitarian and rescue tasks, peacekeeping tasks
and tasks of combat forces in crisis management, including peacemaking.
3. Decisions having defence implications dealt with under this Article shall be taken without prejudice
to the policies and obligations referred to in paragraph 1, second subparagraph.
4. The provisions of this Article shall not prevent the development of closer co-operation between two
or more Member States on a bilateral level, in the framework of the Western European Union (WEU)
and NATO, provided such co-operation does not run counter to or impede that provided for in this title.
5. With a view to furthering the objectives of this Article, the provisions of this Article will be reviewed
in accordance with Article 48.

13 

These were already addressed in the Commission’s 1997 Communication on armaments which findings
and recommendations are still valid.

9

                                                
2.1

Defence equipment demand

New  common  security  risks  will  increasingly  be  dealt  with  by  multinational  coalitions,
requiring interoperability between national forces.

In the ESDP context, in consistency with NATO, there is also an urgent need to enhance the
harmonisation  of  defence  equipment  requirements. To be beneficial  in economic  terms,  this
should  be  translated  into  common  defence  equipment  programmes  with  common  technical
characteristics  and  seamless  procurement  schedules.  The  number  of  defence  equipment
programmes  and  subsequent  procurements  that  could  be  undertaken  jointly  by  the  largest
possible number of Member States should be increased.

That  process  should  help  to  deliver  economies  of  scale  in  production  and  savings  from
increased  bargaining  power  in  acquisition  leading  to  reduced  costs,  in  addition  to  the
advantages which arise from increased interoperability. More predictability and consistency at
European  level  on  planning  and  acquisition  would  enable  industry  to  anticipate  and  better
adjust its production capability.

Given the long lifetime of defence equipment, harmonisation of the planning and procurement
of  equipment  will  also  depend  on  an  improvement  in  the  current  European  Capabilities
Action Plan (ECAP) which should help to bring a longer-term perspective.

Overall guidance, monitoring of progress and matching financing methods to ECAP proposals
will require the  active involvement  of  both  the  European  Council  and  Defence  Ministers  in
order  to  maintain  impetus  and  to  provide  the  necessary  political  authority  to  ensure  rapid
decisions.

2.2

Defence equipment supply

As  noted  above,  there  has  been  steady  consolidation  in  defence-related  industries  in  recent
years.  This  is  especially  so  in  aerospace  which,  in  the  course  of  its  rationalisation,  has
reinforced  its  European  dimension.  There  have  not  yet  been  comparable  levels  of
rationalisation  of  land-based  systems  and  naval  shipyards.  Major  consolidation  in  these
sectors  is  now  required  in  order  to  maintain  Europe’s  capacity  in  areas,  where  Europe  has
traditionally been strong and technologically advanced.

Enlargement will bring special  challenges in that the defence industries in  the new Member
States  are  for  the  most  part  loss-making.  Restructuring  and  rationalisation  are  necessary  to
bring them to viability. This process could be facilitated by social and regional policies using
the Community Structural Funds in accordance with existing modalities.

The  need  to  share  the  huge  development  costs  of  new  systems,  and  to  gain  insight  into
essential technologies, has driven European and American firms into partnerships, such as the
Lockheed Martin-led Joint Strike Fighter, now renamed F-35: the biggest defence programme
in history, worth $200bn over the next 30 years. It is a programme that is likely to dominate
defence  industrial  relations  across  the  Atlantic  for  many  years  to  come.  The  project  offers
participating  countries  the  prospect  of  work  for  their  local  industry  in  advanced  aerospace
technology.  Four  EU  member  states  have  signed  up  to  participate  in  the  programme  and
committed around €4bn to it. The Pentagon has ordered 2900 aircraft. To illustrate the gap in
transatlantic purchasing power, the largest European order amounts to only 150 aircraft.

10

However,  in  the  meantime,  three  fighter  jets  are  currently  produced  in  Europe:  the
Eurofighter, which is a joint venture between Germany, Italy, Spain and the UK; the French
Rafale; and the Swedish-British Gripen.

Such European projects do have certain advantages. They can also enter service more quickly
than  the  F-35,  as  Rafale  and  Gripen  are  already  in  service,  and  Eurofighter  is  scheduled  to
arrive in 2003.

Such  choices  on  key  defence  equipment  programmes  may  have  negative  industrial  policy
consequences regarding the ability of Europe to sustain a competitive and indigenous fighter
jet  industry.  This  is  likely  to  have  an  impact  on  civil  business  and  commercial  transport
aircraft industries.

The  results  for  European  firms  are  very  variable.  Non-US  firms  are  generally  treated  less
favourably  when  they  seek  to  supply  or  partner  US  firms  in  supplying  to  US  procurement
agencies. Firms from Europe also have to adopt special local arrangements in order to observe
rules on ownership of defence firms in the United States. And even where European firms, or
in  some  cases  their  governments,  have  invested  heavily  in  new  weapons  systems  to  be
developed in the US, their level of access to the key design and development phases is rarely
satisfactory.  In  addition  to  the  potential  loss  of  the  ability  to  keep  companies  with  prime
contracting status within the EU, the future of thousands of SMEs’ throughout Europe which
are directly or indirectly linked to these contractors will be adversely affected.

There  is  a  danger  that  European  industry  could  be  reduced  to  the  status  of  sub-supplier  to
prime US contractors, while the key know-how is reserved for US firms.

Decisions on restructuring in Europe will be taken in the first place by firms themselves as a
function of market realities, including the interests of their shareholders. But there are limits
to what companies alone can deliver in terms of further efficiency as long as the framework in
which they operate remains unchanged. The interests of security of supply mean that Member
States individually and collectively have a  clear interest in a competitive industrial structure
for  the  needs  of  national  armed  services  and  ESDP.  Public  interest  also  requires  us  to  take
account  of  the  important  spin  off  effects  in  terms  of  civil  applications  of  these  high  tech
industries.

2.3.

Regulating the EU defence equipment market

European defence-related industries are currently at a critical stage in their development, and
decisions  taken  now  can  be  expected  to  determine  their  future  prospects  and  strengths  for
decades to come. A further complication is that many of the same companies are involved in
producing  for  both  the  civil  and  defence  markets,  which  are  governed  by  two  separate
regulatory frameworks.

It  is  vital  to  reduce  the  handicap  of  European  companies  vis-à-vis  their  competitors,  in
particular  from  the  US,  arising  from  the  fact  that  the  regulations  governing  defence-related
activities  are  not  homogeneous  at  EU  level  but  fragmented  at  national  level.  As  regards
market access outside the EU, the fact that  problems  are  normally  dealt  with at the level of
individual  Member  States  means  an  important  loss  of  negotiating  strength.  The  collective
inability  of  European  firms  and  their  governments  fully  to  exploit  the  weight  of  the  Union,
which comes from acting together, can only be to the detriment of European industry.

11

To  overcome  these  problems  Member  States  should  aim  to  create  a  genuine  European
Defence Equipment Market. This would be in line with the objective already set by Member
States which are  members  of  Western  European  Armaments  Group  –  WEAG14.  In  practice,
the  absence  of  binding  commitments  has  weakened  the  achievement  of  this  objective.  That
deficiency  could  be  remedied  by  an  EU  framework  of  rules  bringing  legal  certainty  and
uniform  implementation  of  legislation.  Such  a  framework  could  also  pave  the  way  for  the
involvement of a larger number of Member States.

2.4.

Research

European  Armament  Organisation  (WEAO)15  has  any  responsibility  for  managing
cooperative  defence-related  research  programmes  but  it  handles  only  2.5%  of  European
investment in this area. Neither OCCAR or the LoI cover research at present.

European countries invest four to five times less than the US, and this gap is accentuated by
the  and  fragmentation  and  compartmentalisation  of  European  research.  This  allows  the
Americans to impose quality standards that Europeans often find hard to meet because of the
failure to invest in certain key technologies.

In  Europe  there  is  a  fairly  strict  divide  between  civil  and  military  research.  Technology
transfers from the civilian sector to the defence sector remain low while there are significant
transfer  from  European  defence  research  to  civilian  activities.  We  need  to  multiply  such
synergies  by  creating  a  snowball  effect 
industrial
competitiveness and help achieve the goal laid down by the Barcelona European Council of
March 2002, namely 3% of GDP devoted to financing research by 2010.16

that  will  strengthen  European 

Defence-related research plays a major role in innovation in the US; it benefits the whole of
industry, including the civilian sector.  This  interpenetration  of defence  and civilian research
has benefited both the  American arms industry and  civilian users in terms of  market  access
and  costs.  Note  that  the  US  military's  procurement  of  advanced  technology,  whereby  it
shoulders  the  risk  and  the  costs  of  demonstration  and  depreciation,  has  also  benefited
American  suppliers  and  facilitated  the  integration  of  such  technologies  into  civilian
applications:  the  internet,  the  "Windows-icons-pointer"  interface,  the  RISC  microprocessor
(found today in mobile telephones) and GPS (Global Positioning System) are all systems that
were  originally  financed  by  American  military  research,  notably  through  DARPA  (Defence
Advanced Research Project Agency).

3. 

Proposals for Action

Developing  an  EU  defence  equipment  policy  will  be  a  long-term  process  involving  many
different stakeholders. The present Communication focuses on a number of specific measures,
which the Commission believes can make a contribution to achieving broader EU objectives.
The proposed measures are intended to encourage industrial restructuring and consolidation,

14 

15

16

Their  Defence  Ministers  have  already  approved  a  set  of  principles  laid  down  in  the  Coherent  Policy
Document (CPD) in 1990 and in an updated CPD in 1999 aimed at making their armaments activities
WEAG-wide.
The  WEAO  has  19  members  (European  members  of  NATO):  Austria,  Belgium,  Czech  Republic,
Denmark, Finland, France, Germany, Greece, Hungary, Italy, Luxembourg, the Netherlands, Norway,
Poland, Portugal, Spain, Sweden, Turkey, United Kingdom. The Netherlands took over the chair on 1
January 2003 for two years.
COM(2002) 499 final.

12

                                                
to  promote  the  establishment  of  a  European  defence  equipment  market  and  to  enhance
competitiveness of the European industry, and to achieve broader socio-economic objectives.

3.1

Towards a European defence equipment market.

3.1.1. 

Standardisation

While  work  on  standardisation  of  defence  equipment  is  largely  a  technical  matter,  it  is  an
important precondition for the opening-up of national markets and the gradual establishment
of  a  single  European  market.  Both  manufacturers  and  public  authorities  (Ministries  of
Defence) will benefit from a common reference regarding standards elaborated in consistency
with NATO works. It will help to enhance cost efficiency and interoperability. That necessity
has been recognised by all those stakeholders who are participating on a voluntary basis in the
development  of  a  “Defence  Standardisation  Handbook”.  It  will  contain  references  to
standards  and  standard-like  specifications  commonly  used  to  support  defence  procurement
contracts as well as guidelines on the optimum selection of such standards.

The action currently under way with the participation of the MoDs and industry and with the
assistance of CEN  is funded under the framework contract  for standardisation  of  1998.  The
Commission will ensure that the European Handbook is ready in its initial phase by the end of
2003 and in a first operational version around the end of 2004.

The  next  phase  should  be  to  give  formal  status  to  the  Handbook  so  that,  once  approved  in
terms  of  content,  its  use  will  be  systematic  in  defence  procurement  contracts.  The
Commission would then propose appropriate complementary measures to ensure the upkeep
of the Handbook and its use.

3.1.2.  Monitoring of defence-related industries

In  accordance  with  the  Community's  task  to  ensure  the  conditions  for  competitiveness  of
industry (Art. 130 TEC), the Commission should keep the situation under permanent review
in all industrial sectors.  In order to monitor the economic situation of the  defence industrial
base at EU level  (including new Member States), including  its ability  to  support  the  supply
requirements  of  ESDP,  the  Union  needs  regular  access  to  the  relevant  data.  Levels  of
competitiveness and design expertise, geographic distribution of expertise, R&D investment,
etc. need to be known and measured in order to allow benchmarking and to contribute to the
development of relevant policies. Moreover, producers need a better knowledge of the market
conditions in which restructuring can take place.

For  this  purpose,  it  is  proposed  that  a  monitoring  activity  be  launched  on  defence-related
industries using data available in EUROSTAT and in the European Statistical System (ESS)
as  well  as  other  relevant  sources  of  information,  including  industrial  associations,  while
respecting existing rules of confidentiality.

3.1.3. 

Intra-Community transfers

The  Commission  is  all  too  aware  that  intra-Community  transfers  of  defence  equipment  are
time-consuming and involve a lot of red tape because of the number of national procedures.
These  procedures  take  the  form  of  individual  licences  for  firms,  import/export  licences,
checks on  delivery  and  in  some  cases  end  user  certificates.  What  is  more,  these  procedures
apply  equally  to  transfers  of  defence  equipment  to  Member  States  as  to  exports  to  non-
member countries. One of the reasons for these complications is the desire of Member States

13

to control  the  final  destination  of  defence  equipment,  especially  in  the  case  of  non-member
countries.

The Commission has therefore tried, working with national experts to identify possible ways
of simplifying intra-Community transfers of defence-related goods. For example, one possible
way  would  be  to  align  national  licensing  systems  by  adopting  the  principle  of  a  global
authorisation  that  would  apply  to  intergovernmental  programmes  and  industrial  cooperation
programmes.

An  impact  analysis  is  thus  needed  to  establish  the  value  added  of  any  Community-level
legislative  initiative.  This  would  also  be  an  opportunity  to  draw  lessons  from  the  transfer
arrangements  for  military  equipment  for  the  armed  forces  under  the  relevant  NATO
agreements. In the light of its findings the Commission will propose an appropriate legislative
instrument (Regulation of Directive). Work on this will start at the end of 2004.

3.1.4.  Competition policy

Competition policy is an essential element of the common market and does not represent an
obstacle to technological change or a hindrance to private initiative. Moreover, it must ensure
that changes brought about by market forces, such as through mergers and acquisitions, do not
lead  to  the  creation  or  strengthening  of  dominant  positions,  but  result  instead  in  benefits  in
terms of innovation and value for money.

Insofar as purely military mergers have been notified to the Commission under the EC Merger
Control Regulation (ECMR), the Commission has not objected to such operations. Recently
however, complex cross-border mergers have occurred, which call for a thorough assessment
of their overall impact on competition, notably with respect to dual-use or civil products. Both
industry  and  governments  would  appreciate  greater  clarity.  Producers  need  a  stable  and
transparent  framework  in  which  restructuring  can  take  place.  Equally,  the  interests  of  other
market  participants,  and  in  particular  customers,  competitors  and  subcontractors  from  other
Member States, also need to be taken into account.

Due to its specificities and in particular to the  close  relationship with public  authorities,  the
defence sector may benefit, directly or indirectly, from public support constituting State aid.
Under  the  provisions  of  Art  296  TEC,  to  the  extent  that  the  companies  concerned  produce
only  military  equipment,  Article  87  TEC  concerning  State  aids  control  has  not  so  far  been
applied. Neither has there has been any notification of such aid based on the argument that it
contributed to the “execution of an important project of common European interest” as set out
by Article 87(3)(b) TEC. Public financial support for defence production should in any case
not alter competitive conditions in the common market of goods, which do not have a specific
military  purpose.  This  aspect  is  of  particular  relevance  when  the  companies  in  question
manufacture  both  strictly  military  and  non-military  products.  It  is  necessary  in  particular  to
ensure  that  there  is  no  cross-subsidisation  between  these  two  activities.  Aid  to  non-
specifically military products falls within the ambit of the standard provisions regarding State
Aid.

The Commission intends to continue its reflection on the application of competition rules in
the  defence  sector  taking  due  account  of  the  specificities  of  this  field  and  the  provisions  of
article 296 ECT.

14

3.1.5. 

Spending better in defence procurement

Removing  inefficiencies  in  the  European  defence  equipment  markets  would  bring  benefits
from  increased  competition,  from  international  trade,  less  duplication  in  R&D  and  both
economies of scale and learning effects in manufacturing.

Further opening of defence procurement at EU level will ensure that all companies would be
dealing  with  the  same  interfaces  and  processes  for  developing,  delivering  and  supporting
equipment  as  well  as  bidding  for  contracts.  EU  Member  States  that  are  also  members  of
WEAG have already endorsed this approach and attempted to open their respective  markets
by  establishing  national  procurement  focal  points  and  by  publishing  their  defence
procurement  needs  in  national  “Official  Journals”.  However,  the  lack  of  any  binding
commitment has weakened that effort.

A first step towards harmonising public procurement rules should be to look into the various
practices and develop a common approach.

On this basis, a reflection on how to optimise defence procurement at national and EU levels
should be initiated in the EU. This would concern products procured by Ministries of Defence
in the Member  States,  or  by  any  European  Agency  that  might  be  created  in  the  future.  The
end goal would be to have a single set of rules for procuring defence equipment in Europe.

There have been several important Court judgements in recent years that are relevant to this
work - especially in helping to define the scope of Article 296. The Commission will issue an
Interpretative Communication by the end of 2003 on the implications of these judgements.

In  parallel,  it  will  work  on  a  Green  Paper  which  might  be  issued  in  2004  as  a  basis  for
discussion with stakeholders. The aim would be to seek an agreement on procurement rules to
apply to defence goods depending on the level of sensitivity of the equipment.

With  the  creation  of  a  European  defence  equipment  market  operating  on  the  basis  of  fair
industrial
competition  among  European  companies,  offsets  (ie  practices 
compensation  required  as  a  condition  for  purchases  of  defence  equipment  and/or  services)
would  no  longer  be  required.  However,  due  to  existing  contractual  obligations,  transitional
arrangements  would  need  to  be  put  in  place.  The  above-mentioned  Green  Paper  will  also
address the issue of offsets in both its intra-EU and external dimensions.

involving 

3.1.6.  Export Control of dual-use goods and technologies.

Dual-use items are goods, software and technologies likely to have both civilian and military
uses17. Member States control exports of these items and participate individually in a number
of informal (politically, but not legally binding) international export control regimes18.

17 
18 

Definition taken from EC regulation n° 1334/2000 of June 22, 2000.
The Australia Group controls exports  and  transhipments  that  could  result  in  proliferation  of  chemical
and biological weapons.
The  Missile  Technology  Control  Regime  aims  at  preventing  proliferation  of  unmanned  delivery
systems for weapons of mass destruction by controlling exports of missiles and related technologies.
The  Nuclear  Suppliers'  Group  controls  transfers  of  nuclear-related  dual-use  equipment,  material  and
technology in order to prevent civilian nuclear trade from contributing to nuclear weapons acquisition.
The Wassenaar Arrangement controls transfers of conventional weapons and sensitive dual-use goods
and technologies, primarily electronic products defined widely. "

15

                                                
The Community Regulation (1334/2000) based on the Article 133 TEC, while supporting the
principle of the free circulation of goods inside the EU, provides for legally binding common
principles  and  rules  for  the  national  implementation  and  enforcement  of  dual-use  export
controls  by  Member  States.  There  is  a  strict  link  with  the  export  control  regimes,  as  the
Regulation  comprises  a  common  list  of  items  subject  to  control,  which  is  directly  derived
from the consensus decisions taken in the regimes.

Due  to  differences  in  the  implementation  of  dual-use  export  control  commitments  by  the
countries participating in the export control regimes (not to mention those countries which are
not part of the  regimes), great care must be  taken  to  prevent  civil  industrial  sectors  such  as
nuclear,  chemical,  biological,  pharmaceutical,  space  and  aeronautics, 
information
technologies,  which  are  potentially  affected  by  the  controls,  from  being  constrained
unnecessarily or unequally.

The Community, by transposing in legal terms the decisions taken by the Member States in
the  export  control  regimes,  imposes  export  control  restrictions  on  European  industries.  The
Commission  is  not  a  member  (with  the  exception  of  the  Australia  Group)  of  the  regimes.
There is a need for greater Commission involvement in order more effectively to make more
effective  co-ordination  of  Member  States’  positions  in  the  various  regimes  and  to  represent
Community interests. In particular, the Commission, while supporting the central objective of
the security of EU  citizens, would also look at the functioning of  the single market  and  the
economic interests of a variety of civil industrial sectors.

While  the  EC  imposes  export  controls  on  dual  use  items  for  security  purposes  and  in
accordance with decisions taken in export control fora, consideration should be given to their
impact on the competitiveness of the EU defence and dual use industries. There is a need to
ensure that all these aspects will be adequately addressed in the perspective of enlargement to
ensure that both the dual use single market and the Community Export control regime are not
adversely affected.

The Commission will bring up the issue of how to achieve these aims with Member States in
the  relevant  Council  working  bodies,  including  the  particular  challenges  stemming  from
enlargement.

3.2. 

Towards a more coherent European advanced security research effort

The  Commission  has  had  a  great  deal  of  experience  in  managing  Community  research
programmes  and  coordinating  national  research  activities  and  programmes.  It  is  willing  to
offer its expertise for an initiative to promote cooperation on advanced research in the field of
global security".

The setting-up of the European Research Area demonstrated that the Union and the Member
States  would  derive  greater  benefits  from  national  research  programmes  if  they  were  better
coordinated,  something  which  is  also  true  of  advanced  security-related  research.  By
harnessing  efforts  at  European  level  with  an  eye  to  medium  to  long-term  requirements,
advanced  technologies  that  are  crucial  for  Europe  could  be  better  developed  and  a  real
European value-added gained.

To  this  end,  and  as  suggested  by  Parliament  in  its  resolution  of  10 April  2002,  the
Commission  will  ask  national  administrations,  industry  and  research  institutions  with
extensive  activity  in  this  area  to  identify  in  the  course  of  this  year  an  European  agenda  for

16

advanced    research  relating  to  global  security  and  the  most  appropriate  ways  of  tackling  it
jointly.

To prepare for the implementation of this advanced research agenda, the Commission intends
to launch a preparatory project  that it would implement with the Member States and industry
to  implement  some  specific  aspects  that  would  be  particularly  useful  in  carrying  out
Petersberg  tasks.  This  preliminary  operation  lasting  no  longer  than  three  years  would
constitute  a  pilot  phase  for  acquiring  the  experience  for  evaluating  the  conditions  and
arrangements needed for effective cooperation between national research programmes in the
field  of  global  security.  It  will  cover  just  a  few  carefully  selected  subjects  of  advanced
technology together with specific accompanying measures.

4. 

4.1

THEMES FOR FURTHER REFLECTION FOR THE EU AND MEMBER STATES

EU Defence Equipment Agency proposals

Article  17  of  the  Treaty  on  European  Union  provides  that  "the  progressive  framing  of  a
common  defence  policy  will  be  supported,  as  Member  States  consider  appropriate,  by
cooperation between them in the field of armaments."  The possibility of creating a European
Armaments  Agency  is  foreseen  in  the  declaration  on  WEU  annexed  to  the  Treaties  of
Maastricht  and  Amsterdam.  The  defence  working  group  of  the  Convention  included  in  its
recommendations the creation of an agency on an intergovernmental basis, which would deal
with armaments and strategic research and could also contribute to ensuring that capabilities
are  improved.  This  proposal  has  been  supported  by  the  Franco-British  declaration  issued  in
the context of the summit which was held in Le Touquet on 4 February 2003.

Various  Member  States  have  already  established  joint  procurement  and  research  initiatives
such as OCCAr, the LoI and WEAO. Any EU initiative should build on this base. We should
seek to create an EU Defence Equipment Framework, including:

–  collaborative programmes on the basis of OCCAr, progressively associating countries that
wish to join in such co-operation in accordance with OCCAr rules (ie abandoning “juste-
retour”) ;

–  research and technology: The Europa MoU agreed within the Western Europe Armament
Organisation framework includes a number of valuable ideas that could be further explored
;  in  a  longer  term  the  EU  should  consider  the  creation  of  a  European  DARPA  (Defence
Advance Research Project Agency);

–  off-the-shelf procurement. This issue  is not currently  addressed  at  a  European level.  It  is

time that it was.

Any  Agency  (or  Agencies)  established  to  oversee  such  an  EU  Framework  should  reflect
Member  States'  political  choice  that  much  of  this  work  should  continue  to  be  conducted
outside  the  current  EC  Treaty.  It  would  be  sensible  nevertheless  to  draw  upon  Community
mechanisms  and  instruments  where  Member  States  agree  that  the  Community  has  a
contribution to make (for example where the work touches on market mechanisms; or where
it  may  be  possible  to  build,  in  the  research  area,  on  experience  with  the  civil  Framework
Programmes).  In  the  longer  run,  too,  Member  States  may  decide  to  develop  some  central
financial  mechanism  to  ensure  that  Member  States  with  disproportionately  small  national
defence budgets nevertheless contribute their fair share to EU capacities.

17

An additional advantage of an EU Defence Equipment Framework of this kind is that it could,
in  some  cases,  would  reinforce  EU’s  position  when  negotiating  commercial  agreements,
thereby strengthening the EU’s hand.

4.2

Security of supply

Until recently the issue of security of supply has been addressed primarily by Member States
individually. The process of consolidation in the defence field, which is necessary for Europe
to maintain a competitive industrial base, is likely to lead to increased sectoral concentration.
Governments  will  be  required  to  accept  the  loss  of  some  domestic  capabilities,  to  procure
directly from foreign or trans-national companies, and to allow changes to the ownership of
defence companies. Mutual dependency between nations for the supply of certain armament
materials  already  exists.  Some  countries  buy  entire  systems  from  foreign  firms,  and  even
where  a  nation  procures  from  national  suppliers,  most  complex  equipment  includes  some
components from non-domestic sources.

By moving towards an EU-wide approach to security of supply Governments could:

- avoid keeping non competitive excess capacity by placing work with national companies,

- be able to allow trans-national mergers involving a change of ownership,

- facilitate trans-national movement and transfers of personnel working on classified matters,

- allow the trans-national transfer of goods and technology.

Such  an  approach  would,  de  facto,  help  to  diversify  sources  of  supply  and  thereby  reduce
dependency on any single supplier, such as the United States.

EU  progress  in  this  field  should  build  on  work  already  undertaken  in  other  forums  such  as
LoI, NATO and WEAG.

4.3

Defence trade issues

A  wider  opening  of  foreign  markets,  especially  the  US,  to  European  defence  products  is  a
major objective as it is essential for the EU defence industries to maintain and further develop
their  design  expertise  and  competence  in  the  most  advanced  technologies.  If  this  does  not
happen, most of the national European markets will remain open to US manufacturers, while
the  US  market  will  remain  closed,  except  for  a  few  European-owned  but  US-based
companies.

Greater credibility in this area  could be  achieved  by  consolidating national defence markets
and  exploiting  the  potential  of  the  combined  EU  defence  procurement  budget  (national  and
EU level). This process would  create  greater  negotiating  capital  for  the  purpose  of  working
towards  enhanced  reciprocity  and  achieving  a  more  level  playing  field  for  European
companies seeking access to US markets.

Further  work  is  needed  on  the  some  these  aspects.  The  Commission  will  revert  to  this  at  a
later stage.

On the question of ethics in arms trade, the Council adopted in 1998 the EU code of conduct
on arms exports. This Code of Conduct is a politically binding instrument that seeks to create
"high common standards" for Member States to use when making arms export decisions and

18

to  increase  transparency  on  conventional  arms  exports.  It  also  has  a  specific  operative
mechanism designed to discourage individual Member States from undercutting sales denied
by  other  EU  states.  A  common  list  of  military  goods  to  which  the  Code  applies  has  been
agreed and serves as a guideline; Member States are free to use their own lists.

A  first  step  towards  a  practical  solution  to  streamlining  export  decisions  regarding  the
products of multinational companies has been made by the six signatory nations of the Letter
of  Intent  (LoI).  The  ideas  developed  there  should  serve  as  a  basis  for  future  EU  rules.  In
particular, a decision to export outside the European Union should take account of  the  need
for prior consultation with the Member States involved in authorisations while recognising the
political responsibility of the final exporting state.

5.

CONCLUSION

This Communication is intended as a further contribution to greater efficiency in the defence
equipment  industry,  which  is  both  an  objective  in  itself  and  an  important  challenge  if  the
Union is to develop a successful ESDP. The Commission proposes to:

(cid:1)  provide  the  necessary  financial  resources  to  ensure  that  the  European  Standardisation
Handbook  is  ready  by  2004  and  then  propose  appropriate  complementary  measures  to
ensure the upkeep of this Handbook and its use;

(cid:1)  launch  a  monitoring  activity  on  defence-related  industries  using  data  available  in
EUROSTAT and in the European Statistical System framework; as well as other relevant
sources of information, while respecting existing rules of confidentiality.

(cid:1)  launch an impact assessment study in 2003 and, depending on its results, start elaborating
at the end of 2004 the appropriate legal instrument to facilitate intra-Community transfer of
defence equipment.

(cid:1)  continue its reflection the application of competition rules in the defence sector taking due

account of the specificities of this field and the provisions of article 296 ECT.

(cid:1)  initiate  a  reflection  on  how  to  optimise  defence  procurement  at  national  and  EU  levels.
Given the important Court judgements in recent years, especially in helping to define the
scope of Article 296, the Commission will issue an  Interpretative  Communication  by the
end of 2003 on the implications of these judgements. In parallel, it will work on a Green
Paper, which might be issued in 2004 as a basis for discussion with stakeholders.

(cid:1)  bring  up,  in  the  relevant  Council  working  bodies,  the  issue  of  the  Commission’s

involvement in export controls regimes.

(cid:1)  launch  a  preparatory  action  for  advanced  research  in  the  field  of  global  security  with  a
view to implementing with the Member States and industry specific practical aspects that
would be useful for carrying out Petersberg tasks in particular;

(cid:1)  to pursue work on a possible EU Defence Equipment Framework overseen by an Agency
(or  Agencies).  This  framework  will  pull  together  national  initiatives  -  especially  in
collaborative programmes in Research and development, and in off-the-shelf procurement.
It will encourage more Member States to join such programmes and it will enable the EU
to draw, where appropriate, on Community mechanisms and instruments.

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