Legal provisions of COM(2022)349 - Establishing the European defence industry Reinforcement through common Procurement Act - Main contents
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| dossier | COM(2022)349 - Establishing the European defence industry Reinforcement through common Procurement Act. |
|---|---|
| document | COM(2022)349  |
| date | October 18, 2023 |
Article 1
Subject matter
This Regulation establishes a short-term instrument for the reinforcement of the European defence industry through common procurement (the ‘Instrument’), for the period from 27 October 2023 to 31 December 2025.
Article 2
Definitions
For the purposes of this Regulation, the following definitions apply:
| (1) | ‘common procurement’ means a procurement jointly conducted by at least three Member States; |
| (2) | ‘control’, with regard to a contractor or subcontractor, means the ability to exercise a decisive influence over a contractor or subcontractor directly, or indirectly through one or more intermediate legal entities; |
| (3) | ‘executive management structure’ means a body of a legal entity, appointed in accordance with national law, and, where applicable, reporting to the chief executive officer, which is empowered to establish that legal entity’s strategy, objectives and overall direction, and which oversees and monitors management decision-making; |
| (4) | ‘non-associated third-country entity’ means a legal entity that is established in a non-associated third country or, where it is established in the Union or in an associated country, that has its executive management structures in a non-associated third country; |
| (5) | ‘procurement agent’ means a contracting authority as defined in Article 2(1), point (1), of Directive 2014/24/EU and Article 3(1), of Directive 2014/25/EU that is established in a Member State or an associated country, the European Defence Agency or an international organisation and that is designated by Member States and associated countries to conduct a common procurement on their behalf; |
| (6) | ‘defence products’ means products that fall within the scope of Directive 2009/81/EC, as set out in Article 2 thereof, including combat medical equipment; |
| (7) | ‘classified information’ means information or material, in any form, the unauthorised disclosure of which could cause varying degrees of prejudice to the interests of the Union, or of one or more of the Member States, and which bears an EU classification marking or a corresponding classification marking, as established in the Agreement between the Member States of the European Union, meeting within the Council, regarding the protection of classified information exchanged in the interests of the European Union (20); |
| (8) | ‘sensitive information’ means unclassified information and data that are to be protected from unauthorised access or disclosure because of obligations laid down in Union or national law, where applicable, or in order to safeguard the privacy or security of a natural or legal person. |
Article 3
Objectives
1. The Instrument has the following objectives:
| (a) | to foster the competitiveness and efficiency of the European Defence Technological and Industrial Base (EDTIB), including SMEs and mid-caps, for a more resilient and secure Union, in particular by speeding up, in a collaborative manner, the adjustment of industry to structural changes, including through the creation and ramp-up of its manufacturing capacities and the opening of the supply chains for cross-border cooperation throughout the Union, thereby allowing the EDTIB to provide the defence products needed by Member States; |
| (b) | to foster cooperation in defence procurement processes between participating Member States in order to contribute to solidarity, prevent crowding-out effects, increase the effectiveness of public spending and reduce excessive fragmentation, ultimately leading to an increase in the standardisation of defence systems and greater interoperability between Member States’ capabilities, while preserving the competitiveness and diversity of products available to Member States and in the supply chain. |
2. The objectives set out in paragraph 1 shall be pursued with an emphasis on strengthening and developing the EDTIB throughout the Union to allow it to address, in particular, the most urgent and critical defence product needs, especially those revealed or exacerbated by the response to the Russian war of aggression against Ukraine, such as the shipment of defence products to Ukraine, taking into account the objectives of the Strategic Compass for Security and Defence and considering the work of the Defence Joint Procurement Task Force. This may be achieved through the replenishment of stockpiles which are depleted as a result of defence-product transfers to Ukraine, including with equipment available on the market, as well as through the replacement of obsolete equipment and the reinforcement of capabilities.
Article 4
Budget
1. The financial envelope for the implementation of the Instrument for the period from 27 October 2023 to 31 December 2025 shall be EUR 300 million in current prices.
2. The financial envelope referred to in paragraph 1 may be used for technical and administrative assistance for the implementation of the Instrument, such as preparatory, monitoring, control, audit and evaluation activities including corporate information technology systems.
3. Resources allocated to Member States under shared management may, at their request, be transferred to the Instrument subject to the conditions set out in the relevant provisions of Regulation (EU) 2021/1060 of the European Parliament and of the Council (21). The Commission shall implement those resources directly in accordance with Article 62(1), first subparagraph, point (a), of the Financial Regulation. Those resources shall be used for the benefit of the Member State concerned.
4. Budgetary commitments for activities extending over more than one financial year may be broken down over several years into annual instalments.
Article 5
Associated countries
The Instrument shall be open to the participation of those members of the European Free Trade Association which are members of the European Economic Area (associated countries), in accordance with the conditions laid down in the Agreement on the European Economic Area.
Article 6
Implementation and forms of Union funding
1. The Instrument shall be implemented under direct management in accordance with the Financial Regulation.
2. The Union funding shall be used to incentivise cooperation between Member States to fulfil the objectives set out in Article 3. The financial contribution shall be established taking into consideration the collaborative nature of the common procurement and the need to create the incentive effect necessary to induce cooperation.
3. By way of derogation from Article 193 of the Financial Regulation, financial contributions may, where necessary for the implementation of an action, cover actions started prior to the date of the request for financial contributions for that action, provided that those actions did not start prior to 24 February 2022 and are not completed before the signature of the grant agreement. Retroactively eligible actions shall comply with all of the eligibility criteria provided for in Articles 8 and 9 of this Regulation.
4. Grants implemented under direct management shall be awarded and managed in accordance with Title VIII of the Financial Regulation.
Article 7
Use of financing not linked to costs
1. Grants shall take the form of financing not linked to costs, pursuant to Article 180(3) of the Financial Regulation.
2. The level of the Union contribution attributed to each action may be defined on the basis of factors such as:
| (a) | the complexity of the common procurement, for which a proportion of the estimated value of the common procurement contract and the experience gained in similar actions may serve as an initial proxy; |
| (b) | the characteristics of the cooperation which are likely to give rise to greater interoperability outcomes and long-term investment signals to industry; or |
| (c) | the number of participating Member States and associated countries or the inclusion of additional Member States or associated countries in existing cooperations. |
3. The Union financial contribution to each action shall not exceed 15 % of the amount referred to in Article 4(1) and shall be capped at 15 % of the estimated value of the common procurement contract per consortium of Member States and associated countries.
4. By way of derogation from paragraph 3 of this Article, the Union financial contribution to each action may amount to up to 20 % of the amount referred to in Article 4(1) and shall be capped at 20 % of the estimated value of the common procurement contract where at least one of the following conditions is met:
| (a) | Ukraine or Moldova are one of the recipients of additional quantities of defence products in the procurement action, in accordance with Article 9(3); |
| (b) | at least 15 % of the estimated value of the common procurement contract is allocated to SMEs or midcaps as contractors or subcontractors. |
Article 8
Eligible actions
1. Only actions fulfilling all of the following criteria shall be eligible for Union funding under the Instrument:
| (a) | they involve cooperation between the eligible entities referred to in Article 10 for common procurement addressing the most urgent and critical defence products needs and implementing the objectives set out in Article 3; |
| (b) | they involve new cooperation, including within an existing framework, or an extension of existing cooperation to at least one new Member State or associated country; |
| (c) | they are carried out by a consortium of at least three Member States; |
| (d) | they fulfil the additional conditions set out in Article 9. |
2. The following actions shall not be eligible for funding:
| (a) | actions for the common procurement of goods or services which are prohibited by applicable international law; |
| (b) | actions for the common procurement of lethal autonomous weapons without the possibility for meaningful human control over selection and engagement decisions when carrying out strikes against humans. |
Article 9
Additional eligibility conditions
1. Member States and associated countries participating in a common procurement shall appoint, by unanimity, a procurement agent to act on their behalf for the purposes of that common procurement. The procurement agent shall carry out the procurement procedures and conclude the resulting contracts with contractors on behalf of the participating countries. The procurement agent may participate in the action as a beneficiary and may act as the coordinator of the consortium, and may therefore be able to manage and combine funds from the Instrument and funds from the participating Member States and associated countries.
This Regulation is without prejudice to the rules on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security laid down in Directive 2009/81/EC.
2. The procurement procedures referred to in paragraph 1 shall be based on an agreement to be signed by the participating Member States and associated countries with the procurement agent under the conditions set out in the work programme. The agreement shall, in particular, determine the practical arrangements governing the common procurement and the decision-making process on the choice of the procedure, the assessment of the tenders and the award of the contract.
3. The agreement referred to in paragraph 2 may authorise the procurement agent to procure additional quantities of the concerned defence product for Ukraine or Moldova. Such an authorisation shall be unanimously approved by the Member States participating in the common procurement.
Such additional procurement arrangements shall be without prejudice to applicable Union law and be in line with Member States’ national laws and regulations relating to the export of defence-related products.
4. Common procurement procedures and contracts shall include the participation requirements for contractors and subcontractors involved in the common procurement set out in paragraphs 5 to 12.
5. Contractors and subcontractors involved in the common procurement shall be established and have their executive management structures in the Union or in an associated country. They shall not be subject to control by a non-associated third country or by a non-associated third-country entity or, alternatively, they shall have been subject to screening within the meaning of Regulation (EU) 2019/452 of the European Parliament and of the Council (22) and, where necessary, to mitigation measures, taking into account the objectives set out in Article 3 of this Regulation.
6. By way of derogation from paragraph 5 of this Article, a legal entity established in the Union or in an associated country and controlled by a non-associated third country or by a non-associated third-country entity may participate in the common procurement if it provides guarantees verified by the Member State or associated country in which the contractor or subcontractor involved in the common procurement is established. The guarantees shall provide assurances that the involvement of the contractor or subcontractor involved in the common procurement does not contravene the security and defence interests of the Union and the Member States as established in the framework of the common foreign and security policy pursuant to Title V of the TEU, or the objectives set out in Article 3 of this Regulation.
7. The guarantees referred to in paragraph 6 of this Article may be based on a standardised template provided by the Commission, assisted by the committee referred to in Article 16, and shall be part of the tender specifications, in order to ensure a harmonised approach throughout the Union. The guarantees shall, in particular, substantiate that, for the purposes of the common procurement, measures are in place to ensure that:
| (a) | control over the contractor or subcontractor involved in the common procurement is not exercised in a manner that restrains or restricts its ability to fulfil the order and to deliver results; and |
| (b) | access by a non-associated third country or by a non-associated third-country entity to classified information relating to the common procurement is prevented and the employees or other persons involved in the common procurement have a national security clearance issued by a Member State or an associated country in accordance with national laws and regulations. |
8. Procurement agents shall provide the Commission with a notification on the mitigation measures applied within the meaning of Regulation (EU) 2019/452 referred to in paragraph 5 of this Article or the guarantees referred to in paragraph 6 of this Article. Further information on the mitigation measures applied or the guarantees shall be made available to the Commission upon request. The Commission shall inform the committee referred to in Article 16 of this Regulation of any notification provided in accordance with this paragraph.
9. The infrastructure, facilities, assets and resources of the contractors and subcontractors involved in the common procurement which are used for the purposes of the common procurement shall be located on the territory of a Member State or of an associated country. Where contractors or subcontractors involved in the common procurement have no readily available alternatives or relevant infrastructure, facilities, assets and resources in the Union or in an associated country, they may use their infrastructure, facilities, assets and resources which are located or held outside the territory of the Member States or of the associated countries, provided that such use does not contravene the security and defence interests of the Union and the Member States and is consistent with the objectives set out in Article 3.
10. Common procurement procedures and contracts shall also include a requirement that the defence product not be subject to a restriction by a non-associated third country or a non-associated third-country entity directly, or indirectly through one or more intermediary legal entities, which limits the ability of a Member State to use that defence product.
11. By way of derogation from paragraph 10 and in light of the geopolitical situation and the urgent need to procure defence products with the support of the Instrument, the requirement referred to in that paragraph shall not apply to urgent and critical defence products, provided that both of the following conditions are met:
| (a) | Member States or associated countries participating in the common procurement commit to studying the feasibility of replacing the components that cause the restriction with an alternative, restriction-free, component Union origin; |
| (b) | the procured defence products were in use prior to 24 February 2022 within the armed forces of a majority of the Member States participating in the common procurement. |
12. The cost of components originating in the Union or associated countries shall not be lower than 65 % of the estimated value of the end product. No components shall be sourced from non-associated third countries that contravene the security and defence interests of the Union and the Member States, including respect for the principle of good neighbourly relations.
13. For the purposes of this Article, ‘subcontractors involved in the common procurement’ means any legal entity which provides critical inputs that possess unique attributes essential for the functioning of a product and which is allocated at least 15 % of the value of the contract.
Article 10
Eligible entities
Provided that they comply with the eligibility criteria set out in Article 197 of the Financial Regulation, entities eligible for funding are:
| (a) | public authorities of Member States; |
| (b) | public authorities of associated countries; |
| (c) | procurement agents. |
Article 11
Award criteria
1. The Commission shall evaluate proposals on the basis of the following criteria for the awarding of the grants:
| (a) | the number of Member States or associated countries participating in each common procurement; |
| (b) | the estimated value of the common procurement; |
| (c) | a demonstration of the action’s contribution to the strengthening of the competitiveness and to the adaptation, modernisation and development of the EDTIB in order to allow it to address, in particular, the most urgent and critical defence-product needs, as referred to in Article 3(2), including with regard to delivery lead times, availability and supply; |
| (d) | a demonstration of the action’s contribution to the replenishment of stockpiles, including those depleted as a result of the response to Russia’s war of aggression against Ukraine, to the replacement of obsolete equipment, and to the reinforcement of capabilities, as referred to in Article 3(2); |
| (e) | the extent of the action’s contribution to strengthening cooperation among Member States or associated countries, in particular through the proportional sharing of technical and financial risks and opportunities based on a genuinely cooperative concept, as well as to the interoperability of products procured under this Regulation; |
| (f) | the action’s contribution to overcoming obstacles to common procurement; |
| (g) | the extent of the action’s contribution to the competitiveness and adaptation of the EDTIB to structural changes, including technological changes, through, inter alia, the envisaged creation or ramping-up of manufacturing capacities, the reservation of manufacturing capacities, and the security of supply; |
| (h) | the participation of SMEs and mid-caps; |
| (i) | the creation of new cross-border cooperation between contractors and subcontractors in the supply chains throughout the Union; |
| (j) | the quality and efficiency of the plans for carrying out the action. |
2. The work programme shall lay down further details concerning the application of the award criteria laid down in paragraph 1, including any weighting to be applied. The work programme shall not set individual thresholds.
3. The Commission shall share the call evaluation report with the committee referred to in Article 16. The Commission shall share with the applicants a detailed report of the outcome of the evaluation of their proposal.
Article 12
Work programme
1. The Instrument shall be implemented through a multiannual work programme pursuant to Article 110 of the Financial Regulation (the ‘work programme’).
2. The Commission shall, by means of an implementing act, adopt the work programme. The implementing act shall be adopted in accordance with the examination procedure referred to in Article 16(3).
3. The work programme shall set out:
| (a) | the minimum financial size of the joint procurement actions; |
| (b) | the indicative amount of financial support for actions carried out by the minimum number of Member States as required by Article 8(1), point (c); |
| (c) | incentives for procurement of a higher value and the inclusion of additional Member States or associated countries in an existing cooperation; |
| (d) | the overall amount of the Union contribution to each funding priority; |
| (e) | a description of actions involving cooperation for common procurement; |
| (f) | the estimated value of common procurement; |
| (g) | the procedure for the evaluation and selection of proposals; |
| (h) | a description of the milestones, which are to be designed in such a way as to mark substantial progress in the implementation of actions, the results to be achieved and the associated amounts that are to be disbursed; |
| (i) | arrangements for the verification of the milestones referred to in point (h), the fulfilment of conditions and the achievement of results; and |
| (j) | the methods for determining and, where applicable, adjusting the funding amounts. |
4. The work programme shall set out funding priorities in line with the needs referred to in Article 3(2). Those funding priorities shall aim to ensure the availability of sufficient quantities of the most urgent and critical defence products to fill the most urgent capability gaps, as referred to in Section 4 of the joint communication on ‘the Defence Investment Gaps Analysis and Way Forward’.
Article 13
Application of the rules on classified information and sensitive information
1. Within the scope of this Regulation:
| (a) | Member States and associated countries participating in a common procurement shall determine, among themselves, the arrangements applicable to the protection of classified information for the purposes of that common procurement, in accordance with national laws and regulations. |
| (b) | each Member State shall ensure that it offers a degree of protection of EU classified information equivalent to that provided by the security rules of the Council set out in Decision 2013/488/EU; |
| (c) | the Commission shall protect EU classified information received in relation to the Instrument in accordance with the security rules set out in Decision (EU, Euratom) 2015/444. |
2. The Commission shall set up a secured exchange system in order to facilitate the exchange of classified information and sensitive information between the Commission and the Member States and associated countries and, where appropriate, with the applicants and the recipients. That system shall take into account Member States’ national security regulations.
Article 14
Monitoring and reporting
1. The Commission shall monitor the implementation of the Instrument and shall report to the European Parliament and to the Council on progress made. To that end, the Commission shall put in place the necessary monitoring arrangements.
2. By 31 December 2026, the Commission shall draw up a report evaluating the impact and effectiveness of the actions taken under the Instrument (the ‘evaluation report’) and shall submit it to the European Parliament and to the Council.
3. The evaluation report shall build on consultations with Member States and key stakeholders and shall assess the progress made towards the achievement of the objectives set out in Article 3. It shall evaluate potential bottlenecks in the functioning of the Instrument and, in particular, the contribution of the Instrument to:
| (a) | cooperation between Member States and associated countries, including the creation of new cross-border cooperation; |
| (b) | the participation of SMEs and mid-caps in the actions; |
| (c) | the creation of new cross-border cooperation between contractors and subcontractors in supply chains throughout the Union; |
| (d) | the strengthening of the EDTIB’s competitiveness and the adaptation, modernisation and development to allow it to address, in particular, the most urgent and critical defence products needs; |
| (e) | the overall value of common procurement contracts for the most urgent and critical defence products supported by the Instrument. |
4. Building on available contributions from the procurement agent, such as feasibility studies pursuant to in Article 9(11), point (a), and, where relevant, on work undertaken in the context of the Observatory of Critical Technologies, the evaluation report shall identify shortfalls and critical dependencies on non-associated third-countries with regard to products procured with financial support from the Instrument. The evaluation report shall inform the Commission’s work on technology roadmaps, including mitigating measures to address those shortfalls and critical dependencies. The Commission shall consider proposing measures to mitigate shortfalls and critical dependencies on non-associated third countries in the context of the European Defence Fund, where appropriate, thinking critically ahead about ways to secure all the components needed in the EDTIB’s supply chain.
5. All reporting requirements of Member States shall be without prejudice to national laws and regulations as well as Article 346 TFEU.
Article 15
Information, communication and publicity
1. Without prejudice to the applicable Union law or national laws and regulations for the protection of classified information and sensitive information, the recipients of Union funding shall acknowledge the origin and ensure the visibility of the Union funding, in particular when promoting the actions and their results, by providing coherent, effective and proportionate targeted information to multiple audiences, including the media and the public.
2. The Commission shall implement information and communication actions relating to the Instrument, to actions taken pursuant to the Instrument and to the results obtained.
3. Financial resources allocated to the Instrument shall contribute to the corporate communication of the political priorities of the Union, insofar as those priorities are related to the objectives set out in Article 3.
Article 16
Committee procedure
1. The Commission shall be assisted by a committee. That committee shall be a committee within the meaning of Regulation (EU) No 182/2011.
2. The European Defence Agency shall be invited to provide its views and expertise to the committee as an observer. The European External Action Service shall also be invited to assist the committee.
3. Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.
Where the committee delivers no opinion, the Commission shall not adopt the draft implementing act and Article 5(4), third subparagraph, of Regulation (EU) No 182/2011 shall apply.
Article 17
Entry into force
This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union.
This Regulation shall be binding in its entirety and directly applicable in all Member States.