Explanatory Memorandum to COM(2017)294 - European Defence Industrial Development Programme aiming at supporting the competitiveness and innovative capacity of the EU defence industry - Main contents
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| dossier | COM(2017)294 - European Defence Industrial Development Programme aiming at supporting the competitiveness and innovative capacity of the EU ... |
|---|---|
| source | COM(2017)294  |
| date | 07-06-2017 |
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.
• 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 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
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.
• 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 co-operations 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 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.