The turn of the year marked the beginning of the final stretch for implementing the EU Defence Package into national law. Just in time before Christmas, the Federation of German Industries (BDI) and the German Association of Trade Unions (DGB) along with other associations and organisations issued a joint declaration requesting the implementation of the new rules for the procurement of military goods within the framework of the established system, i.e. of VOL (Contracting Rules for Award of Public Services and Deliveries) and VOB/A (Contracting Rules for Award of Public Works Contracts). Their aim is to prevent the German Federal Government from issuing an ordinance on defence procurements like the Ordinance on the Procurement of Contracts in the Transport, Water Supply and Energy Sectors (so-called Sector Ordinances – Sektorenverordnung). These new EU procurement rules for the defence sector are one part of the Defence Package which we will be dealing with in a series of blogs beginning with this pilot blog.
What is at issue?
The Defence Package was submitted by the European Commission in December 2007 as part of their „Strategy for a stronger and more competitive European defence industry″ (KOM (2007) 764 final). In the Commission’s notification dated 5 December 2007 a series of measures was proposed aimed at strengthening the European Defence Technology and Industry Base (DTIB) as an dispensable foundation for European security and defence policy.
The Commission had ascertained far-reaching market fragmentation notably characterised by the fact that, as a general rule, the governments in Europe were giving preferential treatment to their domestic defence industry. In particular, the Commission sees the danger that in terms of an autonomous European security policy, required capacities will be lost and that the European industry will develop into a niche provider. As an essential building block for the strengthening of European capacities, the Commission notably proposed measures to improve the European internal market for defence-related products. These measures are expected to contribute to the progressive development of a European market for defence-related products, in which manufacturers established in each Member State will be enabled to supply to all Member States without restrictions in order to create a basic framework for a more competitive and stronger defence industry.
In the defence equipment market, governments are both regulatory authority and biggest customer. This is reflected in the proposition by the EU Commission of two directives, which – after passing through the legislative process – were approved in 2009 and now have to be implemented by summer 2011.
Directive 2009/43/EC simplifying terms and conditions of transfers of defence-related products within the Community aims at eliminating unnecessary formalities in the course of shipment of defence-related products among the Member States. Unlike, for example, in waste legislation, the regulatory framework for the shipment of defence-related products will not be regulated by a European regulation that is directly applicable in the Member States, but instead by a directive that must be implemented by national law. The requirement of approval of cross-border supply of defence-related products within the EU will remain in place. The directive will introduce provisions pursuant to which – in addition to individual approval for each supply procedure – also so-called general authorisations and global authorisations will be granted. Furthermore, a certification system will have to be introduced, certifying enterprises in a Member State that are allowed to be supplied with defence-related products.
The primary purchasers in the defence sector are the Member States themselves. In the past, the Member States mostly referred to Art. 296 of the EC Treaty, now Art. 346 of the Treaty on the Functioning of the European Union – TFEU in order to avoid strict procurement law rules. Although the European Court of Justice (ECJ) had required a narrower interpretation of this provision (ECJ, ruling of 08/04/2008, Rs. C-337/05 – Augusta), extensive use was made of this exemption. This is now expected to be counteracted by Directive 2009/81/EC 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, which establish adapted rules for the award of contracts in this sector.
The Shipment Directive came into force on 30 June 2009 and must be transposed into national legislation in 30 June 2011which is only required to be implemented one year later. The Procurement Directive came into force on 21 August 2009 and must be implemented by 21 August 2011.
For us, this is reason enough to accompany this implementation period by way of a series of contributions in which we will be dealing in more detail with the material provisions of the new legislation and its implementation in Germany. During this period, decisions will have to be made as to whether – as currently envisaged in the relevant departments of the Federal Ministry of Economics and Technology – the contract award provisions will be implemented by a specific ordinance on defence products or whether the associations‘ calls for perpetuation of the VOL/VOB system will prevail.