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
coveredat least as far as security and commercially sensitive
information is concernedsub-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 restructuringand the principal object
of the Agreementis 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!