Select Committee on Defence Appendices to the Minutes of Evidence


Memorandum From Vickers Defence Systems (15 December 2000)

  It is difficult to harmonise every provision of the draft agreement with the articles in the draft proposal to establish OCCAR on a treaty basis by convention. Industry would need specific reassurance that government is not creating a multilateral system of controls which would then bind, slow down and repress the commercial vitality of European defence industries in contrast to the industries of their main competitors in America, Russia and the Far East. There is evidence of direct contradiction between these two initiatives. The Framework which is the subject of this comment seeks to "facilitate (the) restructuring of the defence industry in Europe" possibly by "abandon(ing) national industrial capacity", whereas the draft treaty for OCCAR recognises OCCAR as the means to "genuine industrial and technological complementarity in the relevant fields . . . ". There are many other possible points of overlap between the Executive Committee formed by this Agreement and the putative legitimate interests of OCCAR; examples of uncertainty about which organisation would be the superior authority appear under at least half of the draft articles. Article 48(2) seems to contradict the purpose of OCCAR as a European procurement agency. Is the proposed "organisation with legal personality to manage programmes and proceed to common equipment acquisition" yet another supranational equipment procurement body? There is another apparent overlap with OCCAR in Article 32 which allows for the creation of a separate R&T body funded by the signatories. Is it possible that we intend to have a national DPA and DERA whose functions are repeated by OCCAR and, again, by organisations created from this agreement?

  Whilst industry would welcome any attempt by government to facilitate commercial activity within the European defence industrial sector, it would need reassurance that all defence businesses would be treated equally under this Framework Agreement. There are structural imbalances in the various relationships of the signatories to this agreement and their respective defence industries which would need to be treated directly if a "level playing field" was to be maintained. The French government still owns a substantial proportion of French defence industry and the relationship between the defence industries of Germany and Sweden is substantially different to the "sauve qui peut" attitude of successive British governments to the defence sector in the UK. Will defence industries, whether they are TDCs or not, be able to make representations and appeals to the Executive Committee established by this agreement and, if so, under which articles and on what concerns?

  We would ask that the same tests on the protection of Intellectual Property are applied to this agreement as presently exist in the commercial relationships between the UK DPA and UK defence industries. Recognition of IPR is both a contractural and institutional matter in these relationships but it is not separately identified and treated in this framework agreement. Whilst IPR can be, and is, protected in the internal working arrangements of international consortia this is usually established by MOU and contract. How will industrial IPR be protected in the government-to-government operations of the Executive Committee? (particularly under Part 3 (Transfer and Export Procedures), Part 6 (Treatment of Technical Information) and Part 8 (Protection of Commercially Sensitive Information) which, whilst referring to the protection of industrial rights in the creation of TDCs does not show how shared IPR (that is; IPR developed by government and national industry working in partnership) is to be handled). We are specifically concerned by the apparent weakness of Article 52 as we would rather see some internal measure to protect commercially sensitive information before its transmission, under this agreement, to any other signatory. Article 54(e) is, surely, a legal solipsism. This Agreement must recognise the existence of other contract obligations: this Article only works if the contract "placed by a Party" contained clauses permitting the use and disclosure of information which has commercial value or which is market sensitive. Such a clause would be, to say the very least, highly unusual. Article 54(e) should be framed so as to positively exclude such use or disclosure providing only that third parties may, if they wish, contract to permit such disclosures.

  The Agreement does not describe national procedures for servicing the needs of the Executive Committee. We assume that this would be best provided by the Defence Procurement Agency and would strongly urge that this is made explicit. UK defence industry respects the way in which the DPA handles commercially sensitive information and would have some confidence that these matters would be handled effectively if the DPA was involved.

  Part 7 of the Framework Agreement (Harmonisation of Military Requirements) moves outside the business of facilitating European defence industries and into the domestic and deeply professional business of doctrine, force structures and capability management. It was always a cornerstone of the defence business that "the procurement tail does not wag the operational dog"—that doctrine as expressed in operational requirements is not influenced by industrial/commercial or political imperatives. Articles 46 and 47 move this agreement a long way outside its apparent brief and the Defence Committee would need to be reassured that the Ministry of Defence is aware of, and has coherent plans for, this radical departure from former practice. Although apparently beyond the competence of industrial comment, long experience has shown that it is departures from accepted doctrine or disagreements about doctrine which lies behind most procurement time and cost over-runs. Furthermore, military failure whenever it occurs has at least as much to do with incoherent doctrine as it has to do with failures of leadership, command, training and logistics. The Defence Committee should be aware of the fundamental disagreements on doctrinal matters which exist now between the parties to this agreement. The evidence of this is physical and cultural and can be seen in the substantial differences between the internal structures, standing operating procedures and equipments of, for example, the infantry battalions of Great Britain, France and Germany.

  It is a little difficult to follow the threads of the Agreement in respect to the treatment of sub-contractors to a national prime which is a TDC. Whilst sub-contractors registered as businesses within the states of the signatories appear to be covered—at least as far as security and commercially sensitive information is concerned—sub-contractors from states outside the Agreement are not mentioned. There is some oblique protection of sub-contractor third-party interest in Article 38 (Treatment of Technical Information) but no mention under Part 4 (Security of Classified Information). How does the Executive Committee deal with security and commercial interests of related parties in the event that a TDC selects a sub-contractor from a state outside the Agreement? This needs specific resolution because the commercial freedom of a TDC to operate outside national boundaries in the interests of delivering the best possible product must be protected.

  The Agreement has the intention of facilitating the restructuring of Defence Industries but is effective only amongst the 6 original signatories (albeit those representing the largest share of the European defence industrial sector). The mechanism for this restructuring—and the principal object of the Agreement—is the Transnational Defence Company. Allowing for the creation of TDCs as "a matter for industry to determine", will the agreement treat TDCs created outside the Agreement but registered as businesses domiciled within the EU in the same way as it treats TDCs it has helped to create? This concern is particularly relevant to TDCs comprised of companies from one or more of the signatories to the Framework Agreement and one or more other companies from nations within or outside the EU that are not signatories. Will business be conducted in the same way as hitherto or is the import of Articles 6 and 7 such that TDCs formed under the Agreement are regarded as preferential sources of supply?

  We would conclude on two general notes. Article 46 seems rather naïve. "Long term master-plan(s)" are to be realised in dreams and are not, generally, the stuff of the defence world. Just 8 years ago, the 20 year technology development and procurement plan envisaged the creation of the "remote battlefield", now the US and the UK hope to embark on "Rapid Effect Systems". This is not to say that one or the other of these different views of the future is wrong but they illustrate how quickly strategic, technological and operational factors subvert the hubris inherent in all "master-plans". Finally, Article 41 is, well, it defies interpretation!

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