COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT pursuant to Article 294(6) of the Treaty on the Functioning of the European Union concerning the position of the Council on the adoption of a Regulation of the European Parliament and of the Council establishing the European Defence Fund
Date: 2021-03-19
Institutions: Directorate-General for Defence Industry and Space, European Commission
Subjects: European defence policy, European security, common security and defence policy, competitiveness, defence expenditure, fund (EU), investment promotion, non-associated country, research and development, third country

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   EUROPEAN COMMISSION  Brussels, 19.3.2021  COM(2021) 143 final 2018/0254 (COD)  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT  pursuant to Article 294(6) of the Treaty on the Functioning of the European Union  concerning the position of the Council on the adoption of a Regulation of the European Parliament and of the Council establishing the European Defence Fund (Text with EEA relevance)  
 
2018/0254 (COD) 

COMMUNICATION FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT 

pursuant to Article 294(6) of the Treaty on the Functioning of the European Union 

concerning the 

position of the Council on the adoption of a Regulation of the European Parliament and 
of the Council establishing the European Defence Fund 

(Text with EEA relevance) 

1. 

BACKGROUND 

Date of transmission of the proposal to the European Parliament and 
to the Council (document COM(2018) 476 final – 2018/0254 
COD): 

13 June 2018 

Date of Council partial general approach:  

19 November 2018 

Date of trilogue 1: 

Date of trilogue 2: 

Date of trilogue 3: 

Date of the progress report reflecting the common understanding 
reached at the third trilogue in the Committee of Permanent 
Representatives: 

16 January 2019 

5 February 2019 

19 February 2019 

27 February 2019. 

Date of the position of the European Parliament, first reading: 

18 April 2019. 

Date of Council agreement on a revised negotiation mandate: 

30 September 2020 

Date of trilogue 4: 

Date of trilogue 5 (final): 

Date of political agreement in the Committee of Permanent 
Representatives: 

30 November 2020 

14 December 2020 

18 December 2020 

Date of the ITRE Committee of the European Parliament voted to 
endorse the compromise agreement: 

14 January 2021 

Date of adoption of the Council first reading position: 

16 March 2021 

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2. 

OBJECTIVE OF THE PROPOSAL FROM THE COMMISSION 

The European Union (EU)’s geopolitical context has changed dramatically in the last decade. 
The situation, globally and in its neighbouring regions, is unstable and it faces a complex and 
challenging environment in which new threats, such as cyber-attacks and other hybrid threats 
are emerging, whilst more conventional challenges are also returning. 

European defence, and the European defence industry face significant market inefficiencies, 
linked to untapped economies of scale (fragmentation of national markets with a single buyer) 
and resources overlaps at national level. The demand comes almost exclusively from Member 
States,  but  their  defence  budgets,  in  particular  for  research  and  development  (R&D),  have 
seen  important  budget  cuts  in  the  past  10  years.  The  sector  is  largely  fragmented  across 
national borders, with substantial duplications and resulting inefficiencies in terms of failure 
to capture economies of scale and learning. Despite the combination of increasing costs and 
stagnating  or  shrinking  defence  budgets,  planning,  R&D  spending  and  the  procurement  and 
maintenance of equipment have remained largely matters for individual Member States, with 
very  limited  cooperation  between  them.  This  lack  of  cooperation  between  Member  States 
further  weakens  the  ability  of  the  EU  defence  industry  to  sustain  the  industrial  and 
technological  capabilities  necessary  to  preserve  the  EU's  strategic  autonomy  and  meet  its 
current and future defence and security needs. 

The  European  Defence  Fund  is  intended  as  an  instrument  to  foster  the  competitiveness  and 
innovativeness  of  the  European  defence  technological  and  industrial  base,  thereby 
contributing  to  the  EU's  strategic  autonomy.  It  aims  to  trigger  cooperative  programmes  that 
would not happen without an EU contribution and, by supporting research and development 
activities,  to  provide  the  necessary  incentives  to  boost  cooperation  at  each  stage  of  the 
industrial cycle. 

Collaborative projects with significant cross-border participation by small and medium-sized 
enterprises  will  be  particularly  encouraged.  This  will  ensure  that  the  Fund  remains  open  to 
participants from all Member States, based on their ability to contribute to its objectives and 
regardless of their size and location in the Union. 

3. 

COMMENTS ON THE POSITION OF THE COUNCIL 

The  Council's  position  reflects  the  agreement  reached  in  the  trilogues.  The  most  important 
changes introduced compared to the Commission’s proposal include:  

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Budget:  The  financial  envelope  for  the  implementation  of  the  Programme  for  the 
period  2021-2027  shall  be  EUR 7 953 000 000  in  current  prices.  The  distribution 
ratio of the amount has been kept at one third for research actions and two thirds for 
development actions. 

Duration:  Alignment  of  the  European  Defence  Fund  to  the  duration  of  the  MFF 
2021-2027. 

Governance:  EDF  annual  work  programmes  and  award  decisions  for  both  research 
and development actions shall be adopted in the form of implementing acts (double 
comitology) with use of the examination procedure, whereby the draft implementing 
act  may  not  be  adopted  where  no  opinion  is  delivered.  The  Fund  shall  be 
implemented  in  direct  management,  but  by  way  of  derogation  in  justified  cases 
specific actions may be implemented under indirect management by bodies referred 
to in Article 62(1)(c) of the Financial Regulation; such derogation however shall not 
cover the selection and award procedure. 

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Eligible actions: Actions for the development of lethal autonomous weapons without 
the  possibility  for  meaningful  human  control  over  selection  and  engagement 
decisions when carrying out strikes against humans shall not be eligible for support 
from the Fund, without prejudice to the possibility of providing funding for actions 
for  the  development  of  early  warning  systems  and  countermeasures  for  defensive 
purposes.  

Disruptive Technologies: At least 4% and up to 8% of the financial envelope shall be 
allocated  to  calls  for  proposals  or  awards  of  funding  supporting  disruptive 
technologies  for  defence,  thus  marking  an  increase  of  the  5%  ceiling  initially 
proposed by the European Commission. 

Ownership of  results: Exclusion of results  that are subject  to  control or restrictions 
by a non-associated third country or non-associated third country entity and ex-ante 
notification  to  the  Commission  shall  be  obligatory,  thus  limiting  the  margin  of 
discretion  of  the  Commission  in  applying  these  conditions  on  a  case-by-case  basis. 
Clarification that the EDF regulation shall not affect the discretion of Member States 
as  regards  policy  on  the  export  of  defence-related  products.  Addition  that  Member 
States or associated countries shall have access rights to results of research actions on 
a royalty-free basis that are necessary for the execution of joint follow-up activities.  

Consultation  of  the  project  manager:  Replacement  of  an  information  requirement 
initially proposed by the European Commission with a consultation requirement.  

Rules  on  classified  information:  Introduction  of  a  possibility  for  Member  States  to 
decide  on  a  specific  (national  or  intergovernmental)  security  framework  for  the 
protection and handling of classified information relating to the action. 

Ethics: Actions implemented under the Fund shall comply with the relevant national, 
Union  and  international  law,  as  well  as  with  ethical  principles  reflected  also  in 
relevant  national,  Union  and  international  law,  including  in  particular  international 
human  rights  and  international  humanitarian  law.  To  facilitate  the  compromise  the 
Commission declared that it intends to provide guidance on ethics in defence-related 
research  and  development  to  applicants,  as  well  as  to  independent  experts  tasked 
with ethics screenings and assessments of proposals. 

Coverage of indirect costs: Indirect costs can be determined by two alternative ways 
to  be chosen by the beneficiaries (25% flat  rate  or a determination based on actual 
indirect  costs).  To  facilitate  the  compromise  the  Commission  declared  that  it  will 
respect  the  principle  of  sound  financial  management  (and  thus  principles  of 
economy, efficiency and effectiveness) as embedded in the Financial Regulation. 

Cumulative,  complementary  and  combined  funding:  Deletion  of  the  horizontal 
provision  initially  proposed  by  the  European  Commission  as  shared  management 
funds  such  as  structural  funds  are  typically  geared  towards  projects  with  a  single 
beneficiary from a single Member State. 

Resources  allocated  to  Member  States  under  shared  management:  Co-legislators 
could  not  agree  on  the  possibility  to  transfer  shared  management  funds  to  the 
European Defence Fund. To reach a final compromise the respective paragraph was 
deleted. 

Protection  of  the  financial  interests  of  the  Union:  Addition  of  a  recital  with  a 
reference  to  the  general  regime  of  conditionality  for  the  protection  of  the  Union 
budget against breaches of the principles of the rule of law. 

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Climate: Update of the reference to the overall climate-spending target for the entire 
MFF (initially 25%) to 30%. 

Cybersecurity:  Deletion  of  the  reference  to  the  European  Cybersecurity  Industrial, 
Technology and Research Competence Centre, reference to the Joint Communication 
on cybersecurity was maintained. 

The  Commission  considers  that  the  agreement  reached  preserves  the  objectives  of  the 
Commission’s original proposal.  

4. 

CONCLUSION 

The Commission accepts the position taken by the Council. 

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