Brochure Offsets - European Defence Agency - Europa

The Code of Conduct on OffsetsIntroductionParticipating Member States (pMS) of the European Defence Agency strive toensure that their Armed Forces are supported, and, indeed, that the EuropeanSecurity and Defence Policy is underpinned by a strong and globally competitivedefence technological and industrial base. To this end, the European Defence Ministersadopted on 14 May 2007 a landmark Strategy for the European DefenceTechnological and Industrial Base (EDTIB). This Strategy reflects the clear andunequivocal objective of the pMS to develop and sustain a DTIB in Europe that iscapability–driven, competent and competitive. Moreover, pMS have agreed to developa truly open and competitive European Defence Equipment Market (EDEM)as a key means to strengthen the EDTIB, “which ensures security of supply and dependablysupplies pMS Armed Forces’ needs even in times of conflict, and whichprovides for appropriate national sovereignty and EU autonomy” 1 .The pMS share the ultimate aim to create the market conditions, and developa European DTIB in which offsets may no longer be needed. Nonetheless, thepresent structure of the European DTIB and our early open market efforts require,in the short term, evolving offsets, compatible with EU law, whilst mitigating anyadverse impact they may have on cross-border competition.Objectives and scopeThe Code of Conduct on Offsets sets out a framework for evolving offsets, whilstensuring the right balance between developing the EDTIB and the need toachieve a level playing field in the European and global defence market.This voluntary, non-legally binding Code of Conduct on offsets applies to all compensationpractices required as a condition of purchase or resulting from a purchaseof defence goods or defence services. It is therefore an integral part of theEuropean Defence Agency’s Regime to encourage competition in the EuropeanDefence Equipment Market and it also encompasses Government-to-Governmentoff-the-shelf defence sales.The principles and guidelines of this Code will be applied equally to all biddersfrom sMS and non-sMS including third countries.Overarching PrinciplesWithin the framework of EU law, the subscribing Member States (sMS) committhemselves to implement this Code on the basis of the following principles:Procurement in the defence market remains different than procurement in purelycommercial markets and is strongly influenced by political considerations that affectthe level playing field.In a perfectly functioning market offset would not exist. Nevertheless, we recognisethat today’s defence market is not perfect. Therefore, as a first step, we have todevelop and implement measures to both mitigate any adverse effects of offset inour collective endeavour towards developing a fair and competitive EDEM and touse offsets mainly to help shape the aspired EDTIB of the future.The effects of offset on EDEM and EDTIB should not be considered in isolation.There are other, not offsetrelated, practices distorting the European and globaldefence market and influencing the development of the EDTIB that need to beaddressed by the Agency and pMS through various work-strands.Offsets are a global phenomenon, required and offered for many purposes, andunlikely to abate in the foreseeable future. Hence, while addressing offset on theEU level, cognisance will need to be taken of the global practice of offset and inparticular the involvement of third parties and their effect on European industrycompetitiveness.1 “Characteristics of a Strong Future European Defence Technological and Industrial Base”,agreed by the Steering Board on 20 September 2006.6 7

EUROPEAN DEFENCE AGENCYThe European Defence Agency (EDA) was established by the Council on 12 July2004. It is designed «to support the Council and the Member States in their effortto improve European defence capabilities in the field of crisis management and tosustain the ESDP as it stands now and develops in the future». More specifically,the Agency is ascribed four functions, relating to:a) defence capabilities development;b) armaments cooperation;c) the European defence technological and industrial base and defenceequipment market;d) research and technology.These functions all relate to improving Europe’s defence performance, by promotingcoherence in place of fragmentation.The EDA is an Agency of the European Union. High Representative Solanais Head of the Agency, chairman of the Steering Board, which acts under theCouncil’s authority and within the framework of guidelines issued by the Council.Key Factson the Code of Conduct on Offsets:■■■■■■■■■■■■■■Applies to all compensation practices required as a condition of purchaseor resulting from a purchase of defence goods or defence services, includingGovernment-to-Government salesApplies equally to all bidders including third countriesAn integral part of the Regime on Defence ProcurementMore transparent offset procedures100% cap - offsets, both required and accepted, will not exceed the value ofthe procurement contractVoluntary abatementsOffset portal on EDA website http://www.eda.europa.eu/offsetsKey Facts on the Intergovernmental Regimeon Defence Procurement:■■■■■■■■■■■■Launched on 1 July 2006Today 26 subscribers - 25 out of 26 participating Member States (except Romania)plus NorwayOperated on the basis of the Code of Conduct on Defence Procurement coveringdefence equipment purchases where the provisions of Article 296 of the ECTreaty are applicableCode of Best Practice in the Supply Chain (CoBPSC) extending the benefits ofgreater competition throughout the supply chainElectronic Bulletin Board -http://www.eda.europa.eu/ebbweb/- a key elementproviding opportunities for suppliers across Europe to bid for defence contractsadvertised by subscribing States and their industriesEnhancement of Security of Supply and Security of Information across nationalborders in support of the development of a truly European Defence EquipmentMarket10 11