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Defence procurement has, traditionally, been exempted from the EU's single market for reasons of national security (under Article 296 of the Treaty on European Union). The Code of Conduct for Defence Procurement is a voluntary mechanism designed to introduce competition into those areas of European defence markets covered by Article 296 by injecting transparency, and with it peer pressure, into governments' procurement processes. 22 EU countries originally signed up to the Code and this has since risen to 24 ? only one Member State remains outside the regime, Denmark having opted out of all EU defence initiatives.

Under the Code, governments post contract notices on the Electronic Bulletin Board to enable foreign contractors to bid for them. A monitoring and reporting system is used to analyse governments' adherence to the Code of Conduct and to assess the effect the initiative is having on procurement. The European Defence Equipment Market is worth approximately €35 billion, about half of which is covered by the Article 296 opt out, and the Bulletin Board is already capturing about €10 billion of this business.

A Guide to EDA's Code of Conduct and the European Defence Equipment Market is available below and the Electronic Bulletin Board can be accessed at: http://www.eda.europa.eu/ebbweb/

	European Defence Equipment Market Guide (487.8 KB)
	Derek Marshall speech to RUSI EDA 260606 (56.3 KB)

The European Defence Agency has also been at the forefront of two other key initiatives:

- In October 2006 EU Defence Ministers approved EDA's Initial Long-Term Vision for European Defence Capability and Capacity Needs which provides an assessment of Europe's strategic environment and capability requirements in 2025, designed to assist defence planners, technologists and industrialists in their work. The document can be downloaded below.

- In May 2007 EDA published its Strategy for the European Defence Technological and Industrial Base which provides a view of the future defence technological and industrial base Europe requires and how it can be achieved. The strategy is available below.

	Long Term Vision (1.2 MB)
	Strategy for the European Defence Technological and Industrial Base (119.6 KB)

Alongside the work of the European Defence Agency, the European Commission is becoming increasingly involved in the regulation of the European Defence Equipment Market. SBAC, in cooperation with ASD, is at the heart of efforts to ensure industry's concerns are properly reflected in Commission initiatives.

In December 2006 the Commission published an Interpretative Communication on the application of Article 296, using case law to provide greater clarity on the reasonable use of this derogation. The document emphasises that only essential security interests are relevant; provides a three-part test to help governments decide when to invoke the derogation; points out that economic and industrial factors alone are not sufficient to warrant invocation of Article 296; and reminds governments that use of Article 296 should not have a consequent impact on any part of the non-military market. SBAC will continue to monitor closely the operation of the Commission Interpretative Communication .

The Commission is also currently drawing up three additional measures:

- a Defence Procurement Directive based on the results of a consultation process that was launched with the publication of a Green Paper in September 2004;

- a Regulation on intra-Community transfers;

- and a Communication on the context of the European defence equipment market and the challenges foreseen by the Commission.

	Interpretive Communication on Article 296 (150.7 KB)
	Results of Commission Green Paper on Defence Procurement (51.6 KB)

Under the EU's Seventh Framework Programme for Research and Technological Development, which is the Union 's main instrument for funding research (running from 2007-2013) and is administered by the Commission, €1.4 billion is allocated to Security Research. Although the Commission is not allowed to involve itself in defence matters, the Security Research programme does cover the vast majority of homeland security activities and the objectives of the FP7 Security Research funding stream are:

- to develop technologies and knowledge needed to ensure the security of citizens from threats such as terrorism, organised crime and natural disasters;

- to ensure optimal and concerted use of available and evolving technologies to the benefit of civil European security;

- to stimulate the cooperation of producers and customers in civil security solutions to improve the competitiveness of the European security industry and to deliver mission-oriented results to reduce security gaps.

Further background on the programme is available at: http://ec.europa.eu/enterprise/security/index_en.htm

For companies wishing to apply for FP7 Security Research funding, information on ?Calls for Proposals' is available at: http://cordis.europa.eu/fp7/cooperation/security_en.html