Source: EURLEX
Language: en
Format: md

**Council of the**
**European Union**

**Interinstitutional File:**

**2017/0125 (COD)**

**PROPOSAL**

**Brussels, 22 June 2017**
**(OR. en)**

**10589/17**

**POLMIL 78**
**COMPET 511**
**CFSP/PESC 575**
**CSDP/PSDC 361**
**COPS 212**
**EUMC 81**
**ECOFIN 573**
**IND 171**
**MI 515**
**RECH 246**
**EMPL 384**

From: Secretary-General of the European Commission,
signed by Mr Jordi AYET PUIGARNAU, Director

date of receipt: 8 June 2017

To: Mr Jeppe TRANHOLM-MIKKELSEN, Secretary-General of the Council of
the European Union

No. Cion doc.: COM(2017) 294 final

Subject: Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND
OF THE COUNCIL establishing the European Defence Industrial
Development Programme aiming at supporting the competitiveness and
innovative capacity of the EU defence industry

Delegations will find attached document COM(2017) 294 final.

Encl.: COM(2017) 294 final

10589/17 KP/aga
## DGC 2B EN

EUROPEAN

COMMISSION

Brussels, 7.6.2017
COM(2017) 294 final

2017/0125 (COD)

Proposal for a

**REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL**

**establishing the European Defence Industrial Development Programme aiming at**
**supporting the competitiveness and innovative capacity of the EU defence industry**

{SWD(2017) 228 final}

# **EN EN**

**EXPLANATORY MEMORANDUM**

**1.** **CONTEXT** **OF** **THE** **PROPOSAL**

**•** **Reasons for and objectives of the proposal**

The European defence policy was identified as a key political priority in President Juncker's
political guidelines of July 2014. This should be also viewed in connection with the fact that
after decades of peace and stability, the Union is facing increased instability and new
emerging security threats. This changing security environment demonstrated in a clear way
that only through joint efforts in investing in security development and cooperation at all
levels can we deliver on the expectations of Union citizens and our partners. For Europe to
take over more responsibility for its defence, it is crucial to improve competitiveness and
enhance innovation across the Union defence industry.

The proposal for a "European Defence Industrial Development Programme" (hereinafter "the
Programme") aims at enhancing the competitiveness and innovation of the Union defence
industry including cyber defence. This could be done mainly by fostering better exploitation
of the results of defence research, promoting collaboration between undertakings in the
development of defence products and technologies and by leveraging Member States' efforts
to cooperate so as to ensure that the European defence technological and industrial base can
fully meet Europe’s current and future security needs. This would ultimately help to enhance
the Union strategic autonomy and strengthen its ability to act with partners.

**•** **Consistency with existing policy provisions in the policy area**

In November 2016, the Commission adopted the European Defence Action Plan, which sets
out measures to achieve greater European defence cooperation and support the
competitiveness of the European defence industry. The objective of the European Defence
Action Plan is for the European defence technological and industrial base to fully meet
Europe’s current and future security and defence needs. The initiative was welcomed by the
European Council and the Commission was invited to present proposals in the first half of
2017.

A core proposal of the European Defence Action Plan is the establishment of a European
Defence Fund (hereinafter "the Fund") to support investment in joint research and the joint
development of defence equipment and technologies. The Fund consists of two distinct but
complementary windows which would cover the entire cycle of defence industrial
development from research through to placing products on the market _i.e_ . a research and a
capability window.

Under the research window, the Commission is putting in place mechanisms to direct Union
funding to joint defence research, notably by means of the recently launched Preparatory
Action.

The proposal for the Programme will complement the initiatives to fund collaborative defence
research and will ensure that the results of defence research are further developed thus
contributing to the innovative capacity of the European defence industry and its
competitiveness.

# EN 2 EN

**•** **Consistency with other Union policies**

The European Defence Action Plan, and therefore the Programme, is fully consistent with
initiatives taken at Union level in the context of the Common Foreign and Security Policy. In
particular, it is consistent with the 2016 Global Strategy's "Implementation Plan on Security
and Defence", which provides the basis for the new Union level of ambition endorsed by the
European Council [1] together with actions to fulfil it. The Programme is also linked to the July
2016 "EU-NATO Joint Declaration" signed by the President of the European Council, the
President of the Commission and the Secretary-General of NATO. The Commission will
ensure that other security policies such as Cybersecurity strategy are consistent with the

programme.

The proposed Programme encourages collaboration between undertakings in the development
of products and technologies, taking into account the capability priorities commonly agreed
by Member States within the Union through the Union Capability Development Plan. It will
thus ultimately enhance the Union security and defence interests.

The proposed Programme also takes into account that actions could take place in the context
of the Permanent Structured Cooperation. By allowing for higher co-financing rates for such
actions, the Programme will ultimately incentivise participation in this more advanced
European framework for defence cooperation.

**2.** **LEGAL** **BASIS,** **SUBSIDIARITY** **AND** **PROPORTIONALITY**

**•** **Legal basis**

The draft Regulation proposes measures concerning the Union defence industry. Article 173
of the Treaty on the Functioning of the European Union is the legal basis of this proposal.
This is in line with the objective of the draft Regulation which is to enhance the
competitiveness of the Union Defence Industry by fostering better exploitation of the
industrial potential of innovation and technological development by means of cooperation
between undertakings across the Member States.

**•** **Subsidiarity**

Fostering better exploitation of the results of defence research, innovation and technological
development, by leveraging the cooperation between undertakings established in different
Member States, is an action inherently characterised by its transnational nature. It affects
more than one Member State at the same time and in this sense, cannot be dealt with in a fully
satisfactory manner by the individual Member States.

Indeed, the challenges the Union defence industry faces today clearly point at the need for
coordinated actions. The European defence sector is suffering from low level of investment
and is characterised by fragmentation along national borders leading to persistent
duplications. Besides, a look at the defence industries available in the Union uncovers
growing shortfalls, ageing technologies and a lack of new programmes, especially
collaborative programmes.

Cross-border cooperation can help to better capture scale effects by reducing duplications and
allowing for the development of the products and technologies needed. However, it remains
too limited and the prevalence of non-coordinated national policies of Member States in this

1 Foreign Affairs Council Conclusions, 15.11.2016.

# EN 3 EN

area [2] negatively impacts on the competitiveness and innovation capacity of the Union defence
industry.

Action at Union level will provide added-value by means of further stimulating industrial
defence cooperation through positive incentives and targeting projects in the development
phase that cannot be undertaken successfully at purely national level in view of the costs and
associated risks.

**•** **Proportionality**

The proposal complies with the proportionality principle for the following reason:

Proportionality of the Union intervention is ensured by focusing on the area with the highest
impact on the competitiveness of the sector _i.e._ providing financial support to actions at the
development phase. In light of the fact that the development phase appears to be one of the
riskiest phases and thus one of the most important bottlenecks in the chain of technological
advancements in a project, the Union will contribute in part to the development costs of
defence products and technologies with a view to unlock cooperative development projects.

Moreover, only actions concerning undertakings established in different Member States
represent cases eligible for financial support as they have a clear value by fostering
cooperation across national borders.

At the same time, the Union intervention does not undermine or prejudice in any manner the
support of actions carried out at national level. It only provides additional incentives to
accomplish the most challenging phase of certain of those actions by offering Union support,
where most needed.

**•** **Choice of the instrument**

The Commission proposes a Regulation in order to set up the Programme. This is the most
suitable legal instrument as only a Regulation, with its directly applicable legal provisions,
can provide the necessary degree of uniformity needed for the establishment and operation of
an Union funding programme aiming at supporting an industrial sector across Europe.

**3.** **RESULTS** **OF** **EX-POST** **EVALUATIONS,** **STAKEHOLDER**
**CONSULTATIONS** **AND** **IMPACT** **ASSESSMENTS**

**•** **Ex-post evaluations/fitness checks of existing legislation**

There is no prior existing legislation covering or pertaining to this specific action as there
were - to date - no other Union legislative initiatives aiming at enhancing the competitiveness
of the defence industry targeting specifically the development phase of an action for the
defence sector. Therefore, there is no previous ex-post evaluation or fitness check of existing
legislation that may have taken place for such legislative initiative.

**•** **Stakeholder consultations**

Member States were consulted throughout the preparation of the proposal by means of regular
meetings. Other stakeholders have also been consulted accordingly and were properly
informed about the Commission's intention to prepare such a legislative proposal.

2 Please see also page 12 of the Staff Working Document accompanying the Regulation

# EN 4 EN

**•** **Collection and use of expertise**

A preparatory study on the possible budget for the Programme has been commissioned by the
European Commission. The study elaborates on the existing bottlenecks for establishing cooperations for development programmes and provides reflection elements to take into account
for achieving optimal Union intervention.

**•** **Impact assessment**

The proposal relies on an accompanying Staff Working Document which offers the necessary
elements in order to analyse the impediments that hinder the competitiveness of the sector and
to assess the anticipated impact of the proposal. Due to the urgency of the proposal, in light of
the European Council of 15 December 2016 inviting the Commission "to make proposals in
the first semester of 2017 for the establishment of a European Defence Fund including a
window on the joint development of capabilities commonly agreed by the Member States" [3],
the present Commission proposal is submitted without an impact assessment.

**•** **Regulatory fitness and simplification**

This proposal is not part of the REFIT programme and is not expected to increase the
administrative burden.

**•** **Fundamental rights**

The proposal is in line with the protection of fundamental rights.

**4.** **BUDGETARY** **IMPLICATIONS**

The impact of the proposal on the Union budget is presented in the financial statement
accompanying the proposal and will be met within available resources.

**5.** **OTHER** **ELEMENTS**

**•** **Implementation plans and monitoring, evaluation and reporting arrangements**

The Commission should regularly monitor its actions, review progress made towards
delivering the expected results as well as examine synergies with other complementary Union
programmes or with national programmes co-funded by the Union. Additionally, it is
provided that the Commission may also have independent external evaluations to evaluate the
impact and effectiveness of its actions under this Programme, where appropriate. The
Commission should draw up an evaluation report for the Programme and communicate it to
the European Parliament and to the Council. This report will notably assess the progress made
towards the achievement of the objectives set in the proposal and will analyse the cross border
participation of SMEs in projects under the Programme as well as the participation of SMEs
to the global value chain.

The accompanying Staff Working Document proposes more extended monitoring and
evaluation activities based on the data which are already collected and published by various
organisations active in the European defence sector.

**•** **Detailed explanation of the specific provisions of the proposal**

The Programme will be set up on the basis of the provisions of Article 173 TFEU and its
general objective will be to contribute to the competitiveness and innovative capacity of the

3 Foreign Affairs Council Conclusions, 15.11.2016

# EN 5 EN

Union defence policy by supporting actions in their development phase. Beneficiaries will be
undertakings established in the Union. The Programme shall be established, covering the
period from 1 January 2019 to 31 December 2020.

The proposed intervention strategies would take place through financial assistance. The
funding provided under the Programme would take the form of grants and financial
instruments or via public procurement. More precisely, the Programme would support the
design, definition of common technical specifications, prototyping, testing, qualification and
certification of defence products, tangible or intangible components and technologies. Support
can also be provided for studies, feasibility assessments and other support activities. The
support will aim at actions in the development phase covering both new and the upgrade of
existing products and technologies.

The action should be undertaken by a cooperation of at least 3 undertakings which are
established in at least 2 Member States.

The proposed funding rate will be limited to 20 % of the total cost of the action. Member
States will need to contribute for the remaining costs through pooling of national
contributions. The Union budget will be used to support the competitiveness of the sector by
leveraging the right amount of Member States’ contributions to initiate the cooperation and
will act as enabler for cooperation, unblocking potential collaborative development
programmes. Beneficiaries developing an action in the context of Permanent Structured
Cooperation will be eligible for an increased funding. The supported projects should
contribute to the capability priorities as jointly agreed by Member States within the Union
through the Union Capability Development Plan, as well as bearing in mind regional and
international cooperation, as appropriate. The proposals submitted in view of obtaining
support under the Programme will be evaluated on the basis of award criteria which will be
based on the contribution to the innovation and technological development of defence
industries as well as to the security and defence interests of the Union by enhancing defence
technologies, which contribute to capability priorities commonly agreed by Member States
within the Union, on the viability of the action as well as on the ability of the beneficiaries to
demonstrate that there is a commitment by Member States to jointly produce and procure the
final product or technology in a coordinated way, including joint procurement where
applicable.

The Commission will be responsible for the execution and the management structure of the
Programme. It may however entrust part of the implementation to another entity, in
accordance with the requirements of the Financial Regulation. Additionally, a proportion of
the overall budget should benefit actions enabling the cross-border participation of SMEs.

The proposed budget of the Programme would be 500 million euro.

# EN 6 EN

2017/0125 (COD)

Proposal for a

**REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL**

**establishing the European Defence Industrial Development Programme aiming at**
**supporting the competitiveness and innovative capacity of the EU defence industry**

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular
Article 173 thereof,

Having regard to the proposal from the European Commission,

After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee [4],

Having regard to the opinion of the Committee of the Regions [5],

Acting in accordance with the ordinary legislative procedure,

Whereas:

(1) In the European Defence Action Plan, adopted on 30 November 2016, the
Commission committed to complement, leverage and consolidate collaborative efforts
by Member States in developing defence capabilities to respond to security challenges,
as well as to foster a competitive and innovative European defence industry. It
proposed in particular to launch a European Defence Fund to support investment in
joint research and the joint development of defence equipment and technologies. The
Fund would support cooperation during the whole cycle of defence product and
technology development.

(2) In order to contribute to the enhancement of the competitiveness and innovation
capacity of the Union's defence industry, a European Defence Industrial Development
Programme (hereinafter referred to as the Programme) should be established. The
Programme should aim at enhancing the competitiveness of the Union's defence
industry inter alia cyber defence by supporting the cooperation between undertakings
in the development phase of defence products and technologies. The development
phase, which follows the research and technology phase, entails significant risks and
costs that hamper the further exploitation of the results of research and adversely
impact the competitiveness of the Union's defence industry. By supporting the
development phase, the Programme would contribute to a better exploitation of the
results of defence research and it would help to cover the gap between research and
production as well as to promote all forms of innovation. The Programme should
complement activities carried out in accordance with Article 182 TFEU and it does not
cover the production of defence products and technologies.

4 OJ C […], […], p. […].
5 OJ C […], […], p. […].

# EN 7 EN

(3) To better exploit economies of scale in the defence industry, the Programme should
support the cooperation between undertakings in the development of defence products
and technologies.

(4) The Programme should cover a two year period from 1 January 2019 to 31 December
2020 whereas the amount for the implementation of the Programme should be
determined for this period.

(5) The Programme should be implemented in full compliance with Regulation (EU,
Euratom) No 966/2012 of the European Parliament and of the Council [6] . Funding may
take in particular the form of grants. Financial instruments or public procurement may
be used where appropriate.

(6) The Commission may entrust part of the implementation of the programme to entities
referred to in Article 58(1) (c) of Regulation (EU, Euratom) N°966/2012. In view of
its expertise, the Commission may entrust the European Defence Agency with such a
role.

(7) In view of the specificities of the sector, in practice no collaborative project between
undertakings will be launched if the Member States have not first agreed to support
such projects. After having defined common defence capability priorities at Unionlevel and also taking into account where appropriate collaborative initiatives on a
regional basis, Member States identify and consolidate military requirements and
define the technical specifications of the project. They may also appoint a project
manager in charge of leading the work related to the development of a collaborative
project.

(8) In case an action supported by the Programme is managed by a project manager
appointed by Member States, the Commission should inform the project manager prior
to executing the payment to the beneficiary of the eligible action so that the project
manager can ensure that the time-frames are respected by the beneficiaries.

(9) The Union financial support should not affect the export of products, equipment or
technologies, and it should not affect the discretion of Member States regarding policy
on the export of defence related products. The Union financial support should not
affect Member States' export policies on defence related products.

(10) As the objective of the Programme is to support the competitiveness of the Union
defence industry by de-risking the development phase of cooperative projects, actions
related to the development of a defence product or technology, namely definition of
common technical specifications, design, prototyping, testing, qualification,
certification as well feasibility studies and other supporting measures, should be
eligible to benefit from it. This will also apply to the upgrade of existing defence
products and technologies.

(11) Given that the Programme aims particularly at enhancing cooperation between
undertakings across Member States, an action should be eligible for funding under the
Programme only if it is undertaken by a cooperation of at least three undertakings
based in at least two different Member States.

(12) Cross-border collaboration in the development of defence products and technologies
has often been hampered by the difficulty to agree on common technical

6 Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October
2012 on the financial rules applicable to the general budget of the Union and repealing Council
Regulation (EC, Euratom) No 1605/2002 (OJ L 298, 26.10.2012, p. 1).

# EN 8 EN

specifications. The absence or limited level of common technical specifications have
led to increased complexity, delays and inflated costs in the development phase. The
agreement on common technical specifications should be a condition in order to
benefit from the Union's support under this Programme. Actions aiming at supporting
the creation of a common definition of technical specifications should also be eligible
for support under the Programme.

(13) As the Programme aims at enhancing the competitiveness of the Union's defence
industry, only entities established in the Union and effectively controlled by Member
States or their nationals should be eligible for support. Additionally, in order to ensure
the protection of essential security interests of the Union and its Member States, the
infrastructure, facilities, assets and resources used by the beneficiaries and
subcontractors in actions funded under the Programme, shall not be located on the
territory of non-Member States.

(14) Eligible actions developed in the context of Permanent Structured Cooperation in the
institutional framework of the Union would ensure enhanced cooperation between
undertakings in the different Member States on a continuous basis and thus directly
contribute to the aims of the Programme. Such projects should thus be eligible for an
increased funding rate.

(15) If a consortium of undertakings wishes to participate in an eligible action under the
Programme and financial assistance of the Union is to take form of a grant, the
consortium should appoint one of its members as a coordinator who will be the
principle point of contact with the Commission.

(16) The promotion of innovation and technological development in the Union defence
industry should take place in a manner coherent with the security interests of the
Union. Accordingly, the action's contribution to those interests and to the defence
capability priorities commonly agreed by Member States should serve as an award
criterion. Within the Union, common defence capability priorities are identified
notably through the Capability Development Plan. Other Union processes such as the
Coordinated Annual Review on Defence (CARD) and the Permanent Structured
Cooperation will support the implementation of relevant priorities through enhanced
cooperation. Where appropriate regional or international cooperative initiatives, such
as in the NATO context, and serving the Union security and defence interest, may also
be taken into account.

(17) In order to ensure that the funded actions are viable, the Member States commitment
to effectively contribute to the financing of the action should be an award criterion for
such actions.

(18) In order to ensure that the funded actions will contribute to the competitiveness of the
European defence industry, they should be market-oriented and demand driven.
Therefore, the fact that Member States have already committed to jointly produce and
procure the final product or technology, possibly in a coordinated way, should be
taken into account in the award criteria.

(19) The financial assistance of the Union under the Programme should not exceed 20% of
the total eligible cost of the action when it relates to prototyping which is often the
most costly action in the development phase. The totality of the eligible costs should
however be covered for other actions in the development phase.

(20) As the Union support aims at enhancing the competitiveness of the sector and
concerns only the specific development phase, the Commission should not have

# EN 9 EN

ownership or intellectual property rights over the products or technologies resulting
from the funded actions. The applicable intellectual property rights regime will be
defined contractually by the beneficiaries.

(21) The Commission should establish a multiannual work programme in line with the
objectives of the Programme. The Commission should be assisted in the establishment
of the work programme by a committee of Member States (hereinafter referred to as
Programme Committee). In light of the Union policy on Small and Medium
Enterprises (SMEs) as key to ensuring economic growth, innovation, job creation, and
social integration in the Union and the fact that the supported actions will typically
require trans-national collaboration, it is of importance that the work programme will
reflect and enable such cross-border participation of SMEs and that therefore a
proportion of the overall budget will benefit such action.

(22) In order to benefit from its expertise in the defence sector, the European Defence
Agency will be given the status of an observer in the committee of Member States.
The European External Action Service should also assist in the committee of Member
States.

(23) For the selection of actions to be funded by the Programme, the Commission or the
entities referred to in Article 58(1)(c) of Regulation N°966/2012 should organise
competitive calls as provided for by Regulation No 966/2012. After evaluation of the
received proposals with the help of independent experts, the Commission will select
the actions to be funded under the Programme. In order to ensure uniform conditions
for the implementation of this Regulation implementing powers should be conferred
on the Commission as regards the adoption and the implementation of the work
programme, as well as for awarding the funding to selected actions. Those powers
should be exercised in accordance with Regulation (EU) No 182/2011 of the European
Parliament and of the Council [7] .

(24) The examination procedure should be used for the adoption of the above-mentioned
implementing acts taking into account their substantial implications for the
implementation of the basic act.

(25) The Commission should draw up an implementation report at the end of the
Programme, examining the financial activities in terms of financial implementation
results and where possible, impact. This report should also analyse the cross border
participation of SMEs in projects under the Programme as well as the participation of
SMEs to the global value chain.

HAVE ADOPTED THIS REGULATION:

_Article 1_

A European Defence Industrial Development Programme (hereinafter referred to as the
Programme) for Union action covering the period from 1st January 2019 to 31 December
2020 is hereby established.

_Article 2_

Objectives

7 Regulation (EU) No 182/2011 of the European Parliament and of the Council of 16 February 2011
laying down the rules and general principles concerning mechanisms for control by the Member States
of the Commission's exercise of implementing powers

# EN 10 EN

The Programme shall have the following objectives:

(a) to foster the competitiveness and innovation capacity of the Union defence
industry by supporting actions in their development phase;

(b) to support and leverage the cooperation between undertakings, including small
and medium-sized enterprises, in the development of technologies or products
in line with defence capability priorities commonly agreed by Member States
within the Union;

(c) To foster better exploitation of the results of defence research and contribute to
closing the gaps between research and development.

_Article 3_

Budget

The amount for the implementation of the Programme for the period 2019-2020 is set at EUR
500 million in current prices.

_Article 4_

General financing provisions

1. The Union's financial assistance may be provided through the types of financing
envisaged by Regulation (EU, Euratom) No 966/2012, and in particular:

(a) grants;

(b) financial instruments;

(c) public procurement.

2. The types of financing referred to in paragraph 1 of this Article and the methods of
implementation, shall be chosen on the basis of their ability to achieve the specific
objectives of the actions and to deliver results, taking into account, in particular, the
costs of controls, the administrative burden and the risk of conflict of interests.

3. The Union's financial assistance shall be implemented by the Commission as
provided for by Regulation (EU, Euratom) No 966/2012 directly or indirectly by
entrusting budget implementation tasks to the entities listed in Article 58(1) (c) of
that Regulation.

4. In case a project manager is appointed by Member States, the Commission shall
execute the payment to the eligible beneficiaries after informing the project manager.

_Article 5_

Types of financial instruments

1. Financial instruments set up in accordance with Title VIII of Regulation (EU,
Euratom) No 966/2012 may be used to facilitate access to finance by entities
implementing actions in accordance with Article 6.

2. The following types of financial instruments may be used:

(a) Equity or quasi-equity investments;

(b) Loans or guarantees;

# EN 11 EN

(c) Risk sharing instruments.

_Article 6_

Eligible actions

1. The Programme shall provide support for actions by beneficiaries in the development
phase covering both new and the upgrade of existing products and technologies, in
relation to:

(a) the design of a defence product, tangible or intangible component or
technology as well as the technical specifications on which such design has
been developed;

(b) the prototyping of a defence product, tangible or intangible component or
technology. A prototype is a model of a product or technology that can
demonstrate the element's performance in an operational environment;

(c) the testing of a defence product, tangible or intangible component or
technology;

(d) the qualification of a defence product, tangible or intangible component or
technology; qualification is the entire process of demonstrating that the design
of a product/component/technology meets the specified requirements. This
process provides objective evidence by which particular requirements of a
design are demonstrated to have been achieved;

(e) the certification of a defence product or technology. Certification is the process
according to which a national authority certifies that the
product/component/technology complies with the applicable regulations;

(f) studies such as feasibility studies and other accompanying measures.

2. The action shall be undertaken in a cooperation of at least three undertakings which
are established in at least two different Member States. The undertakings which are
beneficiaries shall not effectively be controlled, directly or indirectly, by the same
entity or shall not control each other.

3. For the purposes of paragraph 2, 'effective control' means a relationship constituted
by rights, contracts or any other means which, either separately or jointly and having
regard to the considerations of fact or law involved, confer the possibility of directly
or indirectly exercising a decisive influence on an undertaking, in particular by:

(a) the right to use all or part of the assets of an undertaking;

(b) rights or contracts which confer a decisive influence on the composition, voting
or decisions of the bodies of an undertaking or otherwise confer a decisive
influence on the running of the business of the undertaking.

4. When it relates to actions defined under point (b) to (f) of the first paragraph, the
action must be based on common technical specifications.

_Article 7_

Eligible Entities

1. Beneficiaries shall be undertakings established in the Union, in which Member States
and/or nationals of Member States own more than 50% of the undertaking and

# EN 12 EN

effectively control it within the meaning of Article 6(3), whether directly or
indirectly through one or more intermediate undertakings. In addition, all
infrastructure, facilities, assets and resources used by the participants, including
subcontractors and other third parties, in actions funded under the Programme shall
not be located on the territory of non-Member States during the entire duration of the
action.

2. If the beneficiary, as defined in paragraph 1, is developing an action, as defined in
Article 6, in the context of Permanent Structured Cooperation, it shall be eligible for
the increased funding referred to in Article 11(2) in respect of that action.

_Article 8_

Declaration by applicants

Each applicant shall declare, by written statement, that it is fully aware of and compliant with
applicable national and Union legislation and regulations relating to activities in the domain
of defence.

_Article 9_

Consortium

1. Where the Union’s financial assistance is provided through a grant, the members of
any consortium wishing to participate in an action shall appoint one of them to act as
coordinator, which shall be identified in the grant agreement. The coordinator shall
be the principal point of contact between the members of the consortium in relations
with the Commission or the relevant funding body, unless specified otherwise in the
grant agreement or in the event of non-compliance with its obligations under the
grant agreement.

2. The members of a consortium participating in an action shall conclude an internal
agreement establishing their rights and obligations with respect to the
implementation of the action (in compliance with the grant agreement), except in
duly justified cases provided for in the work programme or call for proposals.

_Article 10_

Award criteria

Actions proposed for funding under the Programme shall be evaluated on the basis of the
following cumulative criteria:

(a) excellence

(b) contribution to the innovation and technological development of defence industries
and thus to fostering the industrial autonomy of the Union in the field of defence
technologies; and,

(c) contribution to the security and defence interests of the Union by enhancing defence
technologies which contribute to implement defence capability priorities commonly
agreed by Member States within the Union; and,

(d) viability notably via a demonstration by the beneficiaries that the remaining costs of
the eligible action are covered by other means of financing such as Member States’
contributions; and

# EN 13 EN

(e) for actions described in points (b) to (e) of Article 6(1), the contribution to the
competitiveness of the European defence industry through the demonstration by the
beneficiaries that Member States have committed to jointly produce and procure the
final product or technology in a coordinated way, including joint procurement where
applicable.

_Article 11_

Funding rates

1. The financial assistance of the Union provided under the Programme may not exceed
20% of the total cost of the action where it relates to prototyping. In all the other
cases, the assistance may cover up to the total cost of the action.

2. An action developed by a beneficiary referred to in Article 7 paragraph 2 may benefit
from a funding rate increased by an additional 10 percentage points.

_Article 12_

Ownership and Intellectual Property rights

The Commission shall not own the products or technologies resulting from the action nor
shall it have any IPR claim pertaining to the action.

_Article 13_

Work programme

1. The Commission, by means of an implementing act, shall adopt multiannual a work
programme for the duration of the Programme. This implementing act shall be
adopted in accordance with the examination procedure referred to in in Article 16(2).
This work programme shall be in line with the objectives set out in Article 2;

2. The work programme shall set out in detail the categories of projects to be funded
under the Programme;

3. The work programme shall ensure that a credible proportion of the overall budget
will benefit actions enabling the cross-border participation of SMEs.

_Article 14_

Award procedure

1. In the implementation of the Programme, Union funding shall be granted following
competitive calls issued in accordance with Regulation (EU, Euratom) No 966/2012
and Commission Delegated Regulation (EU) No 1268/12 [8] .

2. The proposals submitted following the call for proposals shall be evaluated by the
Commission assisted by independent experts on the basis of the award criteria of
Article 10.

8 Commission Delegated Regulation (EU) No 1268/2012 of 29 October 2012 on the rules of application
of Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council on the
financial rules applicable to the general budget of the Union (OJ L 362, 31.12.2012, p. 1).

# EN 14 EN

3. The Commission shall award, after each call, the funding for selected actions, by
means of an implementing act. Those implementing acts shall be adopted in
accordance with the examination procedure referred to in Article 16(2).

_Article 15_

Annual instalments

The Commission may divide budgetary commitments into annual instalments.

_Article 16_

Committee

1. The Commission shall be assisted by a committee. That committee shall be a
committee within the meaning of Regulation (EU) No 182/2011. The European
Defence Agency shall be invited as observer.

2. Where reference is made to this paragraph, Article 5 of Regulation (EU) No
182/2011 shall apply.

_Article 17_

Monitoring and reporting

1. The Commission shall regularly monitor the implementation of the programme and
annually report on the progress made in accordance with Article 38(3)(e) of
Regulation 966/2012. To this end, the Commission shall put in place necessary
monitoring arrangements.

2. To support greater efficiency and effectiveness of future Union policy actions, the
Commission shall draw up a retrospective evaluation report and send it to the
European Parliament and to the Council. The report - building on relevant
consultations of Member States and key stakeholders - shall notably assess the
progress made towards the achievement of objectives set out in Article 2. It shall also
analyse cross border participation of SMEs in projects implemented under the
programme as well as the participation of SMEs to the global value chain.

_Article 18_

Protection of Union financial interests

1. The Commission shall take appropriate measures to ensure that, when actions
financed under this Regulation are implemented, the financial interests of the Union
are protected by the application of preventive measures against fraud, corruption and
any other illegal activities, by effective checks and, if irregularities are detected, by
the recovery or, where appropriate, the restitution of the amounts wrongly paid and,
where appropriate, by effective, proportionate and dissuasive administrative and
financial penalties.

2. The Commission and the Court of Auditors shall have the power of audit or, in the
case of international organisations, the power of verification in accordance with
agreements reached with them, on the basis of documents and on the spot, over all
grant beneficiaries, contractors and subcontractors who have received Union funds
under this Regulation.

# EN 15 EN

3. The European Anti-Fraud Office (OLAF) may carry out investigations, including onthe-spot checks and inspections, in accordance with the provisions and procedures
laid down in Regulation (EU, Euratom) No 883/2013 of the European Parliament and
of the Council [9] and Council Regulation (Euratom, EC) No 2185/96 [10], with a view to
establishing whether there has been fraud, corruption or any other illegal activity
affecting the financial interests of the Union in connection with a grant agreement or
grant decision or a contract funded under this Regulation.

_Article 19_

This Regulation shall enter into force on the twentieth day following that of its publication in
the _Official Journal of the European Union_ .

This Regulation is binding in its entirety and directly applicable in all Member States.

Done at Brussels,

_For the European Parliament_ _For the Council_
_The President_ _The President_

9 Regulation (EU, Euratom) No 883/2013 of the European Parliament and of the Council of 11
September 2013 concerning investigations conducted by the European Anti-Fraud Office (OLAF) and
repealing Regulation (EC) No 1073/1999 of the European Parliament and of the Council and Council
Regulation (Euratom) No 1074/1999 (OJ L 248, 18.9.2013, p. 1).
10 Council Regulation (Euratom, EC) No 2185/96 of 11 November 1996 concerning on-the-spot checks
and inspections carried out by the Commission in order to protect the European Communities' financial
interests against fraud and other irregularities (OJ L 292, 15.11.1996, p. 2).

# EN 16 EN

**LEGISLATIVE FINANCIAL STATEMENT**

**1.** **FRAMEWORK** **OF** **THE** **PROPOSAL/INITIATIVE**

1.1. Title of the proposal/initiative

1.2. Policy area(s) concerned in the ABM/ABB structure

1.3. Nature of the proposal/initiative

1.4. Objective(s)

1.5. Grounds for the proposal/initiative

1.6. Duration and financial impact

1.7. Management mode(s) planned

**2.** **MANAGEMENT** **MEASURES**

2.1. Monitoring and reporting rules

2.2. Management and control system

2.3. Measures to prevent fraud and irregularities

**3.** **ESTIMATED** **FINANCIAL** **IMPACT** **OF** **THE** **PROPOSAL/INITIATIVE**

3.1. Heading(s) of the multiannual financial framework and expenditure budget
line(s) affected

3.2. Estimated impact on expenditure

_3.2.1. Summary of estimated impact on expenditure_

_3.2.2. Estimated impact on operational appropriations_

_3.2.3. Estimated impact on appropriations of an administrative nature_

_3.2.4. Compatibility with the current multiannual financial framework_

_3.2.5. Third-party contributions_

3.3. Estimated impact on revenue

# EN 17 EN

**LEGISLATIVE FINANCIAL STATEMENT**

**1.** **FRAMEWORK** **OF** **THE** **PROPOSAL/INITIATIVE**

**1.1.** **Title of the proposal/initiative**

Regulation of the European Parliament and of the Council establishing the European
Defence Industrial Development Programme aiming at supporting the
competitiveness and innovative capacity of the EU defence industry.

**1.2.** **Policy area(s) concerned**

Title 02 – Internal Market, Industry, Entrepreneurship and SMEs

Chapter 02.07: European Defence Industrial Development Programme

**1.3.** **Nature of the proposal/initiative**

 The proposal/initiative relates to **a new action**

 The proposal/initiative relates to **a new action following a pilot**
**project/preparatory action** [11]

 The proposal/initiative relates to **the extension of an existing action**

 The proposal/initiative relates to **an action redirected towards a new action**

**1.4.** **Objective(s)**

_1.4.1._ _The_ _Commission's_ _multiannual_ _strategic_ _objective(s)_ _targeted_ _by_ _the_
_proposal/initiative_

The Defence industry is a major element of the Economy of the European Union and
the European Defence Industrial Development Programme aims at enhancing its
competitiveness and its innovation capability.

_1.4.2._ _Specific objective(s)_

11 As referred to in Article 54(2)(a) or (b) of the Financial Regulation.

# EN 18 EN

_1.4.3._ _Expected result(s) and impact_

_Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted._

_1.4.4._ _Indicators of results and impact_

_Specify the indicators for monitoring implementation of the proposal/initiative._

Taking into consideration the short period of implementation, the results and impacts
of the programme will be assessed under retrospective evaluation at the end of the
programme implementation.

The Commission will ensure that the necessary indicators used for the monitoring of
programme implementation will be put in place by the entity entrusted with the
programme implementation. These will include:

         - number of cooperative projects implemented

         - total value of cooperative projects implemented and co-financing level

# EN 19 EN

        - number of companies involved as consortium members and their size (to monitor
the SMEs’ participation)

         - number of Member States involved

         - number of SMEs involved in projects under the programme

**1.5.** **Grounds for the proposal/initiative**

_1.5.1._ _Requirement(s) to be met in the short or long term_

The tasks of this proposal to be carried out will require the set-up of a consortium
through an internal agreement as per article 9 of this Regulation together with the
appointment of one member of this consortium as a coordinator.

The members of the consortium will need to prove their technical capacity to
effectively manage the actions they are given, in particular due to the limited
duration (2 years) of the programme.

The implementing body will need to be staffed with the appropriate technical,
financial and legal experts to prepare the selection of grants, manage their follow-up,
control the outsourced activities and prepare a high quality reporting to the
management of the Commission.

The Commission will also need to be staffed with the appropriate experts in order to
monitor effectively the work of the implementing body.

_1.5.2._ _Added value of Union involvement (it may result from different factors, e.g._
_coordination gains, legal certainty, greater effectiveness or complementarities). For_
_the purposes of this point 'added value of Union involvement' is the value resulting_
_from Union intervention which is additional to the value that would have been_
_otherwise created by Member States alone._

The EU right to act on is based on article 173 of the Treaty on the functioning of the
European Union.

The defence industry projects are managed at a national level and the development
phase is the most risky one. The European defence sector is suffering from low level
of investment and is characterised by fragmentation along national borders leading to
persistent duplications. Besides, a look at the defence industries available in the EU
uncovers growing shortfalls, ageing technologies and a lack of new programmes,
especially collaborative programmes. Cross border cooperation can help to better
capture scale effects by reducing duplications and allowing for the development of
the needed products and technologies.

Also the lack of coordination and coherence between Member States is a source of
competitive disadvantage for the European defence industry vis-a-vis its international
counterparts whilst it remains a major source of costs for the national budget and
constitutes a significant impediment for the implementation of the Common Security
and Defence Policy (CSDP).

# EN 20 EN

Action at EU level will provide added-value by means of further stimulating
industrial defence cooperation through positive incentives, targeting projects in the
development phase of defence products and technologies that cannot be undertaken
at national level in view of the costs and risks associated.

The support of the European Union will allow the defence industry to allocate the
necessary funding to projects which are frequently beyond the means of a single
country: the nature of these projects and their costs make a trans-national cooperation

necessary.

The common technical specifications that will be legally required by the regulation
will drive the Member States and their defence industry towards common standards,
leading to a better and more efficient collaboration.

_1.5.3._ _Lessons learned from similar experiences in the past_

The Pilot project and the Preparatory Action on Defence Research with the EDA are
programmes that can be considered similar: the return of experience on these
programmes, in particular on the governance mode, will be used to define the
management and follow-up of the European Defence Industrial Development
Programme.

_1.5.4._ _Compatibility and possible synergy with other appropriate instruments_

Synergies are possible with other current defence project (for example the
Preparatory Action with the European Defence Agency).

Synergies shall also be sought within the other directorates of the European
Commission regarding research and innovation. The projects to be financed in
support of the European Defence Industrial Development Programme may have,
amongst others, an impact on transport, communications, and energy domains.

It is important to ensure that research and innovation programmes are coordinated by
the Commission to maximise the return on investment.

**1.6.** **Duration and financial impact**

 Proposal/initiative of **limited duration**

–  Proposal/initiative in effect from 1/01/2019 to 31/12/2020

–  Financial impact from 1/01/2018 to 31/12/2023

 Proposal/initiative of **unlimited duration**

–
Implementation with a start-up period from YYYY to YYYY,

–
followed by full-scale operation.

# EN 21 EN

**1.7.** **Management mode(s) planned** **[12 ]**

 **Direct management** by the Commission

–  by its departments, including by its staff in the Union delegations;

–  by the executive agencies

 **Shared management** with the Member States

 **Indirect management** by entrusting budget implementation tasks to:

–  third countries or the bodies they have designated;

–  international organisations and their agencies (to be specified);

–  the EIB and the European Investment Fund;

–  bodies referred to in Articles 208 and 209 of the Financial Regulation;

–  public law bodies;

–  bodies governed by private law with a public service mission to the extent that
they provide adequate financial guarantees;

–  bodies governed by the private law of a Member State that are entrusted with
the implementation of a public-private partnership and that provide adequate
financial guarantees;

–  persons entrusted with the implementation of specific actions in the CFSP
pursuant to Title V of the TEU, and identified in the relevant basic act.

–
_If more than one management mode is indicated, please provide details in the ‘Comments’ section._

Comments

The mode of indirect management is preferred in order to maximise the flexibility of the
programme whilst giving the European Commission all means to control and monitor the
programme and the use of funds.

**2.** **MANAGEMENT** **MEASURES**

**2.1.** **Monitoring and reporting rules**

_Specify frequency and conditions._

In accordance with article 17 of the European Defence Industrial Development
Programme regulation the Commission will regularly monitor the implementation of
the programme and annually report on the progress made by examining the financial
activities and assess achieved results.

To this end, the Commission will put in place necessary monitoring arrangements to
ensure that relevant data from entities entrusted with the programme implementation,
Member States or third parties are collected reliably and smoothly.

12 Details of management modes and references to the Financial Regulation may be found on the
BudgWeb site:
[https://myintracomm.ec.europa.eu/budgweb/EN/man/budgmanag/Pages/budgmanag.aspx](https://myintracomm.ec.europa.eu/budgweb/EN/man/budgmanag/Pages/budgmanag.aspx)

# EN 22 EN

For task implemented under indirect management the Commission will ensure that
efficient and effective monitoring and reporting procedures are embedded in the
Delegation agreement and in the contracts/agreements signed by the entrusted entity
with the selected beneficiaires.

The collected data should enable the Commission to report on the progress made in
accordance with Article 38(3)(e) of Regulation 966/2012 and by reference to the
specifc objectives refered to in point 1.4.2 above.

**2.2.** **Management and control system**

_2.2.1._ _Risk(s) identified_

The identified risks are:

Timetable Risk: Schedule issue, delays in implementation

Governance risk: Lack of cooperation between Member States and/or national
industry

Financial risk: Cost management, Low absorption (delays), ineligible costs, etc.

Technical risks: Difficulties in specific development; Technical issues; Lower
performance level

_2.2.2._ _Information concerning the internal control system set up_

The funds will be managed indirectly via a Delegation Agreement.

Most of the funds are allocated via grants (second layer).

The implementing body will link the attribution of these grants to a periodic
compulsory reporting to be provided by the beneficiaries through the coordinator of
the consortium (article 9 of the regulation).

The contract or agreements that will be signed with the coordinator of the consortium
will detail the obligations of the consortium and in particular the right for the
Commission, in case of lack of or inadequate implementation of the actions or
delays, to reduce, withhold or terminate its financial contribution.

The Commission will agree through the Delegation Agreement on the nature and
frequency of this reporting:

         - Compulsory reporting by the beneficiaries

         - Desk checks on expenses

         - Participation in periodic monitoring meetings (technical and management)

If need be, assistance of external technical experts will be requested when monitoring
the implementation of the programmes. On the basis of the results of on-the-spot
checks, the Commission will ensure that, if necessary, the scale or the conditions of

# EN 23 EN

allocation of the financial contribution originally approved and also the timetable for
payments are adjusted.

Moreover, an audit strategy will be implemented to closely monitor the costs of the
project.

_2.2.3._ _Estimate of the costs and benefits of the controls and assessment of the expected level_
_of risk of error_

The staff included under point 3.2.3.2 should be sufficient to control the
implementation of the funds.

**2.3.** **Measures to prevent fraud and irregularities**

_Specify existing or envisaged prevention and protection measures._

Article 18 of the proposal clarifies the competence of the European Anti-Fraud
Office (OLAF) to carry out investigations on operations supported under this
initiative.

Agreements resulting from this Regulation, including agreements concluded with
participating third countries and international organisations, shall provide for
supervision and financial control by the Commission, or any representative
authorised by it, and audits by the Court of Auditors or OLAF, if necessary on-thespot.

**3.** **ESTIMATED** **FINANCIAL** **IMPACT** **OF** **THE** **PROPOSAL/INITIATIVE**

**3.1.** **Heading(s) of the multiannual financial framework and expenditure budget**
**line(s) affected**

    - Existing budget lines

In order of multiannual financial framework headings and budget lines.

|Heading of<br>multiannual<br>financial<br>framework|Budget line|Type of<br>expenditure|Contribution|Col5|Col6|Col7|
|---|---|---|---|---|---|---|
|Heading of<br>multiannual<br>financial<br>framework|<br>|Diff./Non-<br>diff.13|from<br>EFTA<br>countries<br>14 <br>|from<br>candidate<br>countries15 <br>|from third<br>countries|within the<br>meaning of<br>Article 21(2)(b) of<br>the Financial<br>Regulation|
|||Diff|YES/N<br>O|YES/NO|YES/N<br>O|YES/NO|
|||Non-diff.|YES/N<br>O|YES/NO|YES/N<br>O|YES/NO|

13 Diff. = Differentiated appropriations / Non-diff. = Non-differentiated appropriations.
14 EFTA: European Free Trade Association.
15 Candidate countries and, where applicable, potential candidates from the Western Balkans.

# EN 24 EN

- New budget lines requested

_In order of multiannual financial framework headings and budget lines._

|Heading of<br>multiannual<br>financial<br>framework|Budget line|Type of<br>expenditure|Contribution|Col5|Col6|Col7|
|---|---|---|---|---|---|---|
|Heading of<br>multiannual<br>financial<br>framework||Diff./Non-<br>diff.|from<br>EFTA<br>countries|from<br>candidate<br>countries|from third<br>countries|within the<br>meaning of<br>Article 21(2)(b) of<br>the Financial<br>Regulation|
||02.0701 European Defence Industrial<br>Development Programme|Diff|NO|NO|NO|NO|
||02.010405 – Support expenditure for<br>European Defence Industrial<br>Development Programme|Non-diff.|NO|NO|NO|NO|

# EN 25 EN

**3.2.** **Estimated impact on expenditure**

The proposal will not increase the total level of expenditure programmed under Heading 1a of the Multiannual Financial Framework
2014-2020, as the envelopes of the Connecting Europe Facility, the European Satellite Navigation Programmes, the European Earth
Observation Programme, the ITER Programme and the unallocated margin will be reduced to finance the contribution from the EU
Budget to the European Defence Industrial Development Programme.

EUR million (to three decimal places)

|Sources of financing for the European Defence Industrial<br>Development Programme|2019|2020|Total|
|---|---|---|---|
|CONNECTING EUROPE FACILITY, of which|||145|
|32.020101 – Further integration of the internal energy<br>market and the interoperability of electricity and gas<br>networks<br>across<br>borders<br> <br>32.020102 - Enhancing Union security of energy supply<br> <br>32.020103 - Contributing to sustainable development and<br>protection<br>of<br>the<br>environment<br> <br>09.0303 - Promoting interoperability, sustainable<br>deployment, operation and upgrading of trans-European<br>digital service infrastructures, as well as coordination at<br>European level|<br>20<br> <br> <br>20<br> <br>20<br> <br> <br>10|20<br> <br> <br>20<br> <br>20<br> <br> <br>15|40<br> <br> <br>40<br> <br>40<br> <br> <br>25|
|EUROPEAN<br>SATELLITE<br>NAVIGATION<br>PROGRAMMES<br>(EGNOS and Galileo)<br>, of which|||135|
|02.0501 – Developing and providing global satellite-based<br>radio navigation infrastructures and services (Galileo) by<br>2020|80|50|130|

# EN 26 EN

|02.0502 - Providing satellite-based services improving the<br>performance of GPS to gradually cover the whole European<br>Civil Aviation Conference (ECAC) region by 2020<br>(EGNOS)|Col2|5|5|
|---|---|---|---|
|EUROPEAN EARTH OBSERVATION PROGRAMME,<br>of which|||15|
|02.0601 Delivering operational services relying on space-<br>borne observations and in-situ data (Copernicus)|10|5|15|
|ITER, of which|||80|
|32.050102 Construction, operation and exploitation of the<br>ITER facilities – European Joint Undertaking for ITER —<br>Fusion for Energy (F4E)|30|50|80|
|Unallocated margin, of which|||125|
|Unallocated Margin|55|70|125|

_3.2.1._ _Summary of estimated impact on expenditure_

EUR million (to three decimal places)

**Heading of multiannual financial**

1A Competitiveness for growth and jobs
**framework**

|DG: GROW|Col2|Col3|Col4|2019|2020|2021|2022|2023|TOTAL|
|---|---|---|---|---|---|---|---|---|---|
| Operational appropriations| Operational appropriations| Operational appropriations| Operational appropriations|||||||
|02.07 01|Commitments|(1)|(1)|244.7|254.5||||**499.2**|
|02.07 01|Payments|(2)|(2)|146.7|201.5|100|51|p.m|**499.2**|

# EN 27 EN

| Appropriations of an administrative nature financed from the<br>envelope of specific programmes16|Col2|Col3|Col4|Col5|Col6|Col7|Col8|Col9|
|---|---|---|---|---|---|---|---|---|
|02.01 04 05||(3)|0.3|0.5||||**0.8**|
|**TOTAL appropriations** <br>**for DG GROW **|Commitments|=1+1a<br>+3|245|255||||**500**|
|**TOTAL appropriations** <br>**for DG GROW **|Payments|=2+2a<br>+3|147|202|100|51|p.m|**500**|

| TOTAL operational appropriations|Commitments|(4)|244.7|254.5|Col6|Col7|Col8|499.2|
|---|---|---|---|---|---|---|---|---|
| TOTAL operational appropriations|Payments|(5)|146.7|201.5|100|51|p.m|**499.2**|
| TOTAL appropriations of an administrative nature<br>financed from the envelope for specific programmes| TOTAL appropriations of an administrative nature<br>financed from the envelope for specific programmes|(6)|0.3|0.5||||**0.8**|
|**TOTAL appropriations** <br>**under HEADING 1** <br>of the multiannual financial framework|Commitments|=4+ 6|245|255||||**500**|
|**TOTAL appropriations** <br>**under HEADING 1** <br>of the multiannual financial framework|Payments|=5+ 6|147|202|100|51|p.m|**500**|

**If more than one heading is affected by the proposal / initiative:**

| TOTAL operational appropriations|Commitments|(4)|Col4|Col5|Col6|Col7|Col8|Col9|
|---|---|---|---|---|---|---|---|---|
| TOTAL operational appropriations|Payments|(5)|||||||
| TOTAL appropriations of an administrative nature<br>financed from the envelope for specific programmes| TOTAL appropriations of an administrative nature<br>financed from the envelope for specific programmes|(6)|||||||
|**TOTAL appropriations** <br>**under HEADINGS 1 to 4** <br>of the multiannual financial framework<br>(Reference amount)|Commitments|=4+ 6|||||||
|**TOTAL appropriations** <br>**under HEADINGS 1 to 4** <br>of the multiannual financial framework<br>(Reference amount)|Payments|=5+ 6|||||||

16 Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former ‘BA’ lines), indirect research,
direct research.

# EN 28 EN

**Heading of multiannual financial**

**5** ‘Administrative expenditure’
**framework**

EUR million (to three decimal places)

|Col1|Col2|2018|2019|2020|2021|2022|2023|TOTAL|
|---|---|---|---|---|---|---|---|---|
|DG: GROW <br>|||||||||
| Human resources| Human resources|0.966|0.985|1.005||||**2.956**|
| Other administrative expenditure| Other administrative expenditure|0.199|0.249|0.249||||**0.697**|
|**TOTAL DG**GROW|Appropriations|1.165|1.234|1.254||||**3.653**|

EUR million (to three decimal places)

|Col1|Col2|2018|2019|2020|2021|2022|2023|TOTAL|
|---|---|---|---|---|---|---|---|---|
|**TOTAL appropriations** <br>**under HEADINGS 1 to 5** <br>of the multiannual financial framework|Commitments|1.165|246.234|256.254||||**503.653**|
|**TOTAL appropriations** <br>**under HEADINGS 1 to 5** <br>of the multiannual financial framework|Payments|1.165|148.234|203.254|100|51||**503.653**|

# EN 29 EN

_3.2.2._ _Estimated impact on operational appropriations_

–  The proposal/initiative does not require the use of operational appropriations

–  The proposal/initiative requires the use of operational appropriations, as explained below:

Commitment appropriations in EUR million (to three decimal places)

|Indicate<br>objectives and<br>outputs<br>|Col2|Col3|2019|Col5|2020|Col7|TOTAL|Col9|
|---|---|---|---|---|---|---|---|---|
|**Indicate**<br>**objectives and**<br>**outputs**<br> <br>|**OUTPUTS**|**OUTPUTS**|**OUTPUTS**|**OUTPUTS**|**OUTPUTS**|**OUTPUTS**|**OUTPUTS**|**OUTPUTS**|
|**Indicate**<br>**objectives and**<br>**outputs**<br> <br>|Type<br>17 <br>|Avera<br>ge<br>cost|No<br>Cost|No<br>Cost|No<br>Cost|No<br>Cost|**Total**<br>**No**<br>**Total**<br>**cost**|**Total**<br>**No**<br>**Total**<br>**cost**|
|SPECIFIC OBJECTIVES18 <br>1- To foster the competitiveness of the defence industry<br>2- To support and leverage cooperation between undertakings in the development of defence<br>products and technologies<br>3- To cover the gap between research and innovation and promote all forms of innovation|SPECIFIC OBJECTIVES18 <br>1- To foster the competitiveness of the defence industry<br>2- To support and leverage cooperation between undertakings in the development of defence<br>products and technologies<br>3- To cover the gap between research and innovation and promote all forms of innovation|SPECIFIC OBJECTIVES18 <br>1- To foster the competitiveness of the defence industry<br>2- To support and leverage cooperation between undertakings in the development of defence<br>products and technologies<br>3- To cover the gap between research and innovation and promote all forms of innovation|SPECIFIC OBJECTIVES18 <br>1- To foster the competitiveness of the defence industry<br>2- To support and leverage cooperation between undertakings in the development of defence<br>products and technologies<br>3- To cover the gap between research and innovation and promote all forms of innovation|SPECIFIC OBJECTIVES18 <br>1- To foster the competitiveness of the defence industry<br>2- To support and leverage cooperation between undertakings in the development of defence<br>products and technologies<br>3- To cover the gap between research and innovation and promote all forms of innovation|SPECIFIC OBJECTIVES18 <br>1- To foster the competitiveness of the defence industry<br>2- To support and leverage cooperation between undertakings in the development of defence<br>products and technologies<br>3- To cover the gap between research and innovation and promote all forms of innovation|SPECIFIC OBJECTIVES18 <br>1- To foster the competitiveness of the defence industry<br>2- To support and leverage cooperation between undertakings in the development of defence<br>products and technologies<br>3- To cover the gap between research and innovation and promote all forms of innovation|SPECIFIC OBJECTIVES18 <br>1- To foster the competitiveness of the defence industry<br>2- To support and leverage cooperation between undertakings in the development of defence<br>products and technologies<br>3- To cover the gap between research and innovation and promote all forms of innovation|SPECIFIC OBJECTIVES18 <br>1- To foster the competitiveness of the defence industry<br>2- To support and leverage cooperation between undertakings in the development of defence<br>products and technologies<br>3- To cover the gap between research and innovation and promote all forms of innovation|
|- Output|||2 <br>244.7|2 <br>244.7|1 <br>254.5|1 <br>254.5|**3 **|**499.2**|
|Subtotal for specific objective No 1|Subtotal for specific objective No 1|Subtotal for specific objective No 1|2|244.7|1|254.5|**3 **|**499.2**|
|**TOTAL COST**|**TOTAL COST**|**TOTAL COST**|**2 **|**244.7**|**1 **|**254.5**|**3 **|**499.2**|

17 Outputs are products and services to be supplied (e.g.: number of student exchanges financed, number of km of roads built, etc.).
18 As described in point 1.4.2. ‘Specific objective(s)…’

# EN 30 EN

_3.2.3._ _Estimated impact on appropriations of an administrative nature_

3.2.3.1. Summary

–  The proposal/initiative does not require the use of appropriations of an
administrative nature

–  The proposal/initiative requires the use of appropriations of an administrative
nature, as explained below:

EUR million (to three decimal places)

|HEADING 5<br>of the multiannual<br>financial framework|Col2|Col3|Col4|Col5|Col6|Col7|Col8|
|---|---|---|---|---|---|---|---|
|Human resources|0.966|0.985|1.005||||**2.956 **|
|Other administrative<br>expenditure|0.199|0.249|0.249||||**0.697 **|
|**Subtotal HEADING 5** <br>**of the multiannual**<br>**financial framework**|1.165|1.234|1.254||||**3.653 **|

|19<br>Outside HEADING 5<br>of the multiannual<br>financial framework|Col2|Col3|Col4|Col5|Col6|Col7|Col8|
|---|---|---|---|---|---|---|---|
|Human resources||||||||
|Other expenditure<br>of an administrative<br>nature||||||||
|**Subtotal** <br>**outside HEADING 5** <br>**of the multiannual**<br>**financial framework**||||||||

The appropriations required for human resources and other expenditure of an administrative nature will be met by
appropriations from the DG that are already assigned to management of the action and/or have been redeployed within the
DG, together if necessary with any additional allocation which may be granted to the managing DG under the annual
allocation procedure and in the light of budgetary constraints.

19 Technical and/or administrative assistance and expenditure in support of the implementation of
EU programmes and/or actions (former ‘BA’ lines), indirect research, direct research.

# EN 31 EN

3.2.3.2. Estimated requirements of human resources

–  The proposal/initiative does not require the use of human resources.
–  The proposal/initiative requires the use of human resources, as explained
below:

_Estimate to be expressed in full time equivalent units_

|Col1|Col2|2018|2019|2020|2021|2022|2023|
|---|---|---|---|---|---|---|---|
|** Establishment plan posts (officials and temporary staff)**|** Establishment plan posts (officials and temporary staff)**|** Establishment plan posts (officials and temporary staff)**|** Establishment plan posts (officials and temporary staff)**|** Establishment plan posts (officials and temporary staff)**|** Establishment plan posts (officials and temporary staff)**|** Establishment plan posts (officials and temporary staff)**|** Establishment plan posts (officials and temporary staff)**|
|02 01 01 01 (Headquarters and Commission’s<br>Representation Offices)|02 01 01 01 (Headquarters and Commission’s<br>Representation Offices)|7|7|7||||
|XX 01 01 02 (Delegations)|XX 01 01 02 (Delegations)|||||||
|XX 01 05 01 (Indirect research)|XX 01 05 01 (Indirect research)|||||||
|10 01 05 01 (Direct research)|10 01 05 01 (Direct research)|||||||
|** External staff (in Full Time Equivalent unit: FTE)**20 <br>|** External staff (in Full Time Equivalent unit: FTE)**20 <br>|** External staff (in Full Time Equivalent unit: FTE)**20 <br>|** External staff (in Full Time Equivalent unit: FTE)**20 <br>|** External staff (in Full Time Equivalent unit: FTE)**20 <br>|** External staff (in Full Time Equivalent unit: FTE)**20 <br>|** External staff (in Full Time Equivalent unit: FTE)**20 <br>|** External staff (in Full Time Equivalent unit: FTE)**20 <br>|
|XX 01 02 01 (AC, END, INT from the ‘global<br>envelope’)|XX 01 02 01 (AC, END, INT from the ‘global<br>envelope’)|||||||
|XX 01 02 02 (AC, AL, END, INT and JED in the<br>delegations)|XX 01 02 02 (AC, AL, END, INT and JED in the<br>delegations)|||||||
|**XX** 01 04**yy** 21 <br>|- at Headquarters <br>|||||||
|**XX** 01 04**yy** 21 <br>|- in Delegations|||||||
|**XX** 01 05 02 (AC, END, INT - Indirect research)|**XX** 01 05 02 (AC, END, INT - Indirect research)|||||||
|10 01 05 02 (AC, END, INT - Direct research)|10 01 05 02 (AC, END, INT - Direct research)|||||||
|Other budget lines (specify)|Other budget lines (specify)|||||||
|**TOTAL**|**TOTAL**|**7 **|**7 **|**7 **||||

**XX** is the policy area or budget title concerned.

The human resources required will be met by staff from the DG who are already assigned to management of the
action and/or have been redeployed within the DG, together if necessary with any additional allocation which
may be granted to the managing DG under the annual allocation procedure and in the light of budgetary
constraints.

Description of tasks to be carried out:

20 AC= Contract Staff; AL = Local Staff; END= Seconded National Expert; INT = agency staff;
JED= Junior Experts in Delegations.
21 Sub-ceiling for external staff covered by operational appropriations (former ‘BA’ lines).

# EN 32 EN

|Col1|To monitor the action and analyse the technical progress<br>To participate to major project meetings<br>To report to management|
|---|---|
|External staff||

# EN 33 EN

_3.2.4._ _Compatibility with the current multiannual financial framework_

–  The proposal/initiative is compatible the current multiannual financial
framework.

–  The proposal/initiative will entail reprogramming of the relevant heading in the
multiannual financial framework.

The proposal will be funded from the specific budget lines:

02.0501 Developing and providing global satellite-based radio navigation infrastructures and services
(Galileo) by 2020

02.0502 Providing satellite-based services improving the performance of GPS to gradually cover the
whole European Civil Aviation Conference (ECAC) region by 2020 (EGNOS)

02.0601 Delivering operational services relying on space-borne observations and in-situ data
(Copernicus)

32.050102 Construction, operation and exploitation of the ITER facilities — European Joint
Undertaking for ITER — Fusion for Energy (F4E)

32.020101 – Further integration of the internal energy market and the interoperability of electricity
and gas networks across borders

32.020102 - Enhancing Union security of energy supply

32.020103 - Contributing to sustainable development and protection of the environment

09.0303 - Promoting interoperability, sustainable deployment, operation and upgrading of transEuropean digital service infrastructures, as well as coordination at European level

Unallocated Margin

–  The proposal/initiative requires application of the flexibility instrument or
revision of the multiannual financial framework.

_3.2.5._ _Third-party contributions_

–  The proposal/initiative does not provide for co-financing by third parties.

–  The proposal/initiative provides for the co-financing estimated below:

Appropriations in EUR million (to three decimal places)

|Col1|Year<br>N|Year<br>N+1|Year<br>N+2|Year<br>N+3|Enter as many years as necessary<br>to show the duration of the<br>impact (see point 1.6)|Col7|Col8|Total|
|---|---|---|---|---|---|---|---|---|
|Specify the co-financing<br>body|||||||||
|TOTAL appropriations<br>co-financed|||||||||

# EN 34 EN

**3.3.** **Estimated impact on revenue**

–  The proposal/initiative has no financial impact on revenue.

–  The proposal/initiative has the following financial impact:

–  on own resources

–  on miscellaneous revenue

EUR million (to three decimal places)

|Budget revenue line:|Appropriations<br>available for the<br>current<br>financial year|22<br>Impact of the proposal/initiative|Col4|Col5|Col6|Col7|Col8|Col9|
|---|---|---|---|---|---|---|---|---|
|Budget revenue line:|Appropriations<br>available for the<br>current<br>financial year|Year <br>**N**|Year <br>**N+1**|Year <br>**N+2**|Year <br>**N+3**|Enter as many years as necessary to show<br>the duration of the impact (see point 1.6)|Enter as many years as necessary to show<br>the duration of the impact (see point 1.6)|Enter as many years as necessary to show<br>the duration of the impact (see point 1.6)|
|Article ………….|||||||||

For miscellaneous ‘assigned’ revenue, specify the budget expenditure line(s) affected.

Specify the method for calculating the impact on revenue.

_______________

22 As regards traditional own resources (customs duties, sugar levies), the amounts indicated must be net
amounts, i.e. gross amounts after deduction of 25 % for collection costs.

# EN 35 EN