Select Committee on European Scrutiny Thirty-Second Report



Financing of EU-led crisis management operations having military or defence implications.

Legal base:
Department:Foreign and Commonwealth Office
Basis of consideration:EM of 10 June and Minister's letter of 11 June 2002
Previous Committee Report:None
To be discussed in Council:Seville European Council on 21-22 June
Committee's assessment:Politically important
Committee's decision:Cleared


  21.1  In a letter dated 5 April 2002, the then Parliamentary Under-Secretary of State (Mr Ben Bradshaw) provided us with a Presidency compromise text dated 22 March 2002 on the Financing of Crisis Management Operations with Military or Defence Implications[44]. He said that, although Article 28 under Title V of the Treaty on European Union sets out the broad principles, it had become clear to the Member States that a framework agreement was needed on the financing of EU-led crisis management operations under the European Security and Defence Policy (ESDP) which have military or defence implications.

  21.2  The key points of the framework agreement, which had been under discussion for some time, were described as:

"—  Under Title V of the Treaty of European Union operational expenditure arising from operations having military or defence implications must be charged to Member States.

  • In the initial phase of ESDP, the financing of operations will be based on the combination of the principle of costs lie where they fall, with a common cost component (so each Member State funds its own contribution of personnel and/or equipment, but certain costs are defined as 'common').

  • A review of financing arrangements will take place in three years at the latest."

  21.3  The Minister said that the Government had worked hard to achieve early results and, in the draft he attached, had achieved its objective of securing agreement that costs should lie where they fall, with a common cost element. We were told that the Belgian Presidency had produced a paper in September 2001 which set out three options on financing:

(1)  all costs to be treated as common;

(2)  costs to lie where they fall, plus a narrow definition of common costs;

(3)  costs to lie where they fall, plus a broader definition of common costs.

The Government was not in favour of option (a) which would have meant supporting the costs of men and equipment of other Member States, on a similar ratio to its contribution to the EC budget, regardless of whether British forces and equipment were committed. Its preference was for option (b), the closest to the NATO model, which has worked well. A list broadly defining the common costs was attached to the Presidency text.

The Minister's letter and Explanatory Memorandum

  21.4  The Minister for Europe (Mr Peter Hain) says that discussions continue. The latest draft Presidency text, dated 4 June, which he attaches, will be adopted at the Seville European Council, if agreement is reached on it. It aims to agree the general principle of financing and to identify the key areas for further work.

  21.5  The Minister gives a full summary in the Explanatory Memorandum of the text. He says that in the first two sections it lists the general principles:

Section 1

"This section sets out the legal basis for financing military operations:

  • Under Title V of the Treaty on European Union, administrative expenditure entailed for the Institutions is to be charged to the EC budget (Article 28.2 TEU).

  • Operational expenditure arising from operations with military or defence implications must be charged to Member States (Article 28.3 TEU).

  • Member States whose representatives in the Council have made a formal declaration under Article 23(1), second paragraph, shall not be obliged to contribute to the financing of a military/defence operation.

"Member States also express a commitment to ensuring that military operations should be launched and carried out in a cost-efficient and effective way."

Section 2

"This section states that:

  • financing of military operations should consist of two main elements:

(a)  a 'costs lie where they fall' formula, ie each Member State should finance its own contribution;

(b)  an element of 'common costs' for those parts of the operation which cannot practically be allotted to individual Member States (para 2.1).

  • there is a clear distinction between the financing arrangements for an ESDP operation and Member States' ongoing commitment to addressing capability shortfalls in line with the Headline Goal set at Helsinki (para 2.2).

  • the costs which Member States already incur by keeping forces and equipment ready for military operations will not be covered by the ESDP financing arrangements. These arrangements will only apply to additional costs incurred by a specific operation (para 2.3).

  • the 'common costs' element of an ESDP operation will cover specific costs incurred by:

"(a)  deployable or fixed headquarters;


"(b)  the forces themselves (para 2.4a).

  • the detailed exact financial arrangements for any ESDP military operation will be agreed on a case by case basis by a unanimous Council decision when it is agreed to take on a specific military crisis management operation. The Council will appoint a committee to oversee the finances of any ESDP military operation. That Committee will be made up of national representatives and vote by unanimity (para 2.4b)."

Section 3

  21.6  The paper notes that these financing arrangements are an interim measure. A full review will be made in three years time, or earlier if necessary.

Section 4

  21.7  The Minister summarises this section as follows:

"Eight areas for further work are identified for Member States to complete the detail of the framework agreement on ESDP financing:

(i)    whether we will need a separate budget for EU common costs;

(ii)    once an operation is complete, how to evenly re-distribute costs of equipment which is destined for an individual Member State but was funded using the common costs mechanism.

(iii)    whether we will need a Start Up Fund for the common costs incurred during preparations for an operation;

(iv)    the financial arrangements for EU use of NATO assets in an ESDP operation (pending resolution of the Berlin Plus arrangements);

(v)    how third countries' financial contributions will be managed;

(vi)    how the interface between ESDP military and civilian operations should be managed;

(vii)    further work on the annex;

(viii)  how to fund maintenance work on any commonly purchased equipment."


"Part I of the Annex sets out which costs incurred by a deployable or fixed headquarters will be funded by the 'common costs' mechanism:

  • transport to and from theatre

  • administration

  • locally hired personnel

  • communications

  • transport within the headquarters operation area

  • public information

  • representation and hospitality

  • infrastructure within the headquarters

"Part II of the Annex sets out which costs incurred by the forces as a whole will be funded by the 'common costs' mechanism:

  • transport

  • infrastructure

  • barracks and lodging

  • claims and damage compensation

  • additional equipment

  • identification marking

  • medical."

The Government's view

  21.8  The Minister says that the Government's key objective, to secure agreement on the principle that costs lie where they fall, with a common cost element, continues to be met in the current draft. He adds that, as the draft makes clear:

"further detailed work is needed on arrangements for how third countries would contribute, whether we should set up a separate budget for common costs, whether we will need a start-up fund and the precise definition of common costs. We expect the latter to cover administration, communication, transport and local personnel costs."

  21.9  The Minister undertakes to write again when a final text has been agreed.


  21.10  We thank the Minister for providing us with this insight into the discussions on how ESDP crisis management operations of this sort are to be financed. We recognise the wisdom of adopting a framework agreement. The time taken in the discussions, in which he, like his predecessor, says that the Government has worked hard to achieve its key objective and secure early agreement, demonstrates that a number of issues needed to be worked out in advance, and the fact that further detailed work is required reinforces the point.

  21.11  We now clear this document and note the Minister's commitment to write again when the final text has been agreed.

44  Not reported. Back

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