Defence Market

  • May 18, 2017

Internal Defence Market 

In the EU, the internal market for defence is based on the two directives 2009/81 (on procurement) and 2009/43 (on intra-EU transfers), which were adopted in 2009 as part of the European Commission’s first Defence Package:

The Defence and Security Procurement Directive regulates the purchase of (sensitive) defence and security goods and technologies in EU Member States.  Member States have transposed the Directive into their national legislation, which provides the legal framework for defence procurement contracts.  

More information on defence procurement

The Intra-EU Transfers Directive aims at easing transfers of defence items between EU Member States. In order to boost the use of the directive, additional tools were developed in the past years. Particularly important in this context is the identification of common lists of items allowed under General Transfers Licences (GTL) under commonly agreed conditions. 

European certification scheme: Companies trading in defence products may request to be certified from their national authorities to attest their ability to receive certain defence-related products if they respect all the conditions attached to those products (such as end-use and end-user specifications). It is interesting for companies to be certified when national authorities have published General Transfers Licences for approved items on the Common EU Military List that they trade (see above GTL for Certified Recipient), as this removes the need to request individual transfers licences.  The CERTIDER database will provide this information, as it is a EU central register of Certified companies, and it lists the approved GTLs from each Member State. It also includes lists of all national competent authorities for certification and details about the certificates and the links to each relevant legislation. 

More information on the CERTIDER database

More information on the Transfers Directive and the European certification scheme

 

Dual-Use Trade

Whilst defence exports are governed by national law, the trade of dual-use items (i.e. civil items that can also be used for military purposes) falls under EU law. The EU Dual-Use Export Control Regulation 428/2009 governs exports of dual-use goods, software and technologies to third countries, but also intra-EU transfers, brokering and transit of dual-use items.  As a regulation, it is not transposed into national law, but is directly applicable in all EU Member States. It includes the EU Dual-Use List which is regularly updated by the incorporation of all changes decided in the multi-lateral export controls regimes (such as for example the Wassenaar Arrangement).

In addition to national export authorisations (general, global and individual licences), the EU regime proposes 6 EU General Export Authorisationscovering certain items to certain destinations (exports to Australia, Canada, Japan, New Zealand, Norway, Switzerland, Liechtenstein, and the United States of America (and to the UK after Brexit); export of certain dual-use items to certain destinations; export after repair/replacement; temporary export for exhibition or fair; telecommunications; chemicals). 

More information on the EU Dual-Use export control regime

A review of the EU dual-use export control regime was launched in 2014 and is still ongoing in 2019. ASD supports the objectives of more simplification and greater harmonization of procedures in Member States. At the same time, changes to EU export control lists should be in line with multilateral export control regimes to ensure that European industry is not disadvantaged on the global market. 

Brexit: In order to ensure a continued flow of dual-use items from the EU to the United Kingdom, the EU amended the Dual-Use Regulation, allowing certain dual-use items to be exported from the EU to the UK, which will only apply if no Withdrawal Agreement is concluded on the day that the EU Treaties cease to apply to the UK (EU Regulation 2019/496).

Guidelines for companies’ Internal compliance programmes 
Companies which produce, incorporate or trade with dual-use items are obliged to comply with strategic trade control requirementsimposed by the laws and policies of the EU and national authorities. The scope and extent of these policies are usually determined by the size and the commercial activity of each company. While large companies have more resources to track the multitude of increasingly complex trade control regulations and restrictions, it is particularly difficult for SMEsto know how to set up suitable internal procedures to comply with trade controls.  In July 2019, the EC published guidelines aimed at helping companies to establish their “Internal Compliance Programme” (“ICP”), i.e. the set of company rules, procedures and policies that guarantee that the company is in compliance with dual-use trade controls. It includes information on company structure, transaction screening processes, how to conduct risk assessment and audits, how to ensure proper recordkeeping and information security, as well as a list of questions useful to develop an ICP or check whether the existing ICP is robust enough. 
 

Armament Exports

The export of military technology and equipment is primarily governed by Member States’ national legislation which are framed by numerous European Decisions (embargoes, anti-corruption and sanctions), the Common Position (on export controls), policies (security and related foreign policy), national membership of multi-lateral export controls regimes as well as various international conventions, registers and treaties. The defence sector is one of the most regulated industrial segment in terms of exports. In particular, the EU Common Position on the Control of Exports of Military Technology and Equipment and the United Nations Arms Trade Treaty. The EU User’s Guide (to the Common Position) provides lists of all relevant information sources which inform Member States decisions on arms exports. 

  • The 2008 EU Common Position on arms export controls defining the common criteria on export controls was revised in September 2019. Updates to the EU Military List and an Annual Report on exports are published regularly. A Common Position on arms brokering was adopted in 2003, regulating brokering activities in the EU or carried out by EU nationals.  
  • The United Nations Arms Trade Treaty sets standards for the international trade in conventional arms (from small arms to battle tanks, combat aircraft and warships). It entered into force in December 2014, with around 130 signatories. 104 states have so far ratified the Treaty, including all EU Member States, and a further 33 have signed it.  Obligations and commitments under the Treaty are consistent with EU and Member States’ law. The ATT introduces measures aimed at preventing the illicit diversion and illegal transfers of conventional armament by establishing rules and procedures that State Parties commit to implement at national level. 

    Since the start of the ATT process in 2006, ASD has supported its development as industry believes the ATT will raise the bar for the regulation of the trade in conventional arms globally and will generate nonproliferation safeguards and procedures in importing countries, thereby improving the safety of the trade. A summary of the main principles and functioning of the Treaty is available in the Universalisation Toolkit.

More information on the EU Common Position, the EU Military List and the ATT

 
 
More Information
Isabelle Maelcamp
Senior Defence Adviser
Alessandro Riccardo Ungaro
Defence Manager
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