EXPLANATORY MEMORANDUM ON THE EUROPEAN UNION S COMMON FOREIGN AND SECURITY POLICY

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1 14866/17 EXPLANATORY MEMORANDUM ON THE EUROPEAN UNION S COMMON FOREIGN AND SECURITY POLICY COUNCIL DECISION 2017/.../CFSP of 2017 establishing Permanent Structured Cooperation (PESCO) and determining the list of Participating Member States Submitted by the Foreign and Commonwealth Office on 13 December SUBJECT MATTER 1. On 11 December, at the Foreign Affairs Council, EU Foreign Ministers agreed to establish Permanent Structured Cooperated (PESCO) - a political framework based on a set of binding commitments intended to improve the respective military assets and defence capabilities of participating Member States. PESCO will allow groups of participating Member States to club together to propose and pursue specific capability initiatives and projects. 2. The launch of PESCO is in accordance with Articles 42.6 and 46 of the Treaty on the European Union (TEU), and Protocol 10, which provided that those Member States whose military capabilities fulfil higher criteria and which have made more binding commitments to one another shall establish PESCO. 3. PESCO progressed in 2016 as part of the wider Security and Defence Implementation Plan following the publication of the European Global Strategy. At the June 2017 European Council, Member States were tasked with drawing up within three months a common list of criteria and binding commitments. In July, France and Germany released a draft notification letter. On 28 September, France, Germany, Italy, and Spain, supported by the EEAS, submitted a Draft Notification on PESCO, expanding on the July version. UK officials from both the Ministry of Defence and Foreign and Commonwealth Office have attended PESCO workshops at both the technical and policy level and have engaged closely in PESCO s development. 4. The Notification Letter covers: the principles of PESCO; a list of binding common commitments for PESCO participating Member States to subscribe to; and an Annex on governance arrangements, including a reference to third State access. There is a link made to the development of the European Defence Fund (EDF) with the offer of support from the EDF for joint and collaborative projects if required and appropriate. Participating Member States are also required to commit to provide a National Implementation Plan in advance of the adoption of the Council Decision.

2 5. The October European Council Conclusions and the November Foreign Affairs Council (Defence) Conclusions committed Member States to launch PESCO by the end of The Council and the High Representative received notification, in accordance with Article 46 of the TEU, from 23 Member States of their intention to participate in PESCO on the basis of the more binding commitments as set out within the Notification Letter, which they then signed the Notification Letter at the Foreign Affairs Council (Defence) on 13 November. 6. Article 46(2) of the TEU stipulates that within three months following the Notification, the Council should adopt a decision establishing PESCO and determining the list of participating Member States. The Council would act by a Reinforced Qualified Majority after consulting the High Representative. In line with this timescale, and the political commitment to agree PESCO by the end of the year, the Council Decision to launch PESCO was adopted at the Foreign Affairs Council on 11 December. Three Member States did not join PESCO by this date: Denmark, Malta, and the UK. 7. PESCO will be organised at two levels: the political level and the project level. At the political level, PESCO will be implemented by existing structures, including the Political Security Committee (PSC) and meetings of the Foreign Affairs Council (Defence). Only PESCO participating Member States will exercise voting rights when it comes to decisions on PESCO, which will be subject to unanimity of participating Member States. Third States will not be able to fully participate in PESCO but will be able to participate in individual projects, in accordance with the Notification Letter of 13 November and Articles 4 and 9 of the Council Decision. SCRUTINY HISTORY 8. There is no formal scrutiny history. On 23 November 2017, the Minister for Europe wrote to Chairs of both the European Scrutiny Committee and Lords European Union Committee on the subject matter of PESCO. On 8 December 2017, the Minister for Europe wrote again to both Chairs to inform them that he had decided to override scrutiny. MINISTERIAL RESPONSIBILITY 9. The Secretary of State for Foreign and Commonwealth Affairs is the Minister with overall responsibility for UK policy on the EU s Common Foreign and Security Policy. The Secretaries of State for Defence, particularly given the defence focus on this, and Exiting the EU have an interest. INTEREST OF THE DEVOLVED ADMINISTRATIONS 10. The UK s Foreign Affairs policy is a reserved matter under the UK s devolution settlements and no devolved administration interests arise. The devolved administrations have not been consulted in the preparation of this EM.

3 LEGAL AND PROCEDURAL ISSUES 11. Legal Basis: Articles 42 (6), 46 of the TEU and Protocol Voting Procedures: Reinforced Qualified Majority. When the Council acts without a Commission proposal or one from the High Representative for Foreign Affairs and Security Policy, the qualified majority must include at least two-thirds of EU countries. The provisions of the Lisbon Treaty regarding qualified majority voting entered into force on 1 November The reinforced qualified majority therefore comprises at least 72% of the members of the Council representing 65% of the EU's population. 13. Impact on UK Law: None. 14. Application to Gibraltar: Yes. 15. Fundamental rights analysis: No fundamental rights issues apply. APPLICATION TO THE EUROPEAN ECONOMIC AREA 16. None. SUBSIDIARITY 17. Not applicable. POLICY IMPLICATIONS (including Exit implications where appropriate) 18. On 23 June 2016, the EU referendum took place and the people of the United Kingdom voted to leave the European Union. The Government respected the result and triggered Article 50 of the Treaty on European Union on 29 March 2017 to begin the process of exit. Until exit negotiations are concluded, the UK remains a full member of the European Union and all the rights and obligations of EU membership remain in force. During this period, the Government will also continue to negotiate, implement and apply EU legislation. 19. The UK did not sign the Notification Letter, but we have welcomed the establishment of PESCO as we recognise its potential to help drive up defence investment in Europe and to strengthen capability. The UK has consistently said that if it is to be successful, PESCO must be designed in a way that strengthens the relationship with NATO and promotes an open and competitive European defence industry. It is important to us that projects carried out under PESCO arrangements should remain Member State-owned and that the capabilities delivered are available not only to the EU but can also be used in support of NATO and UN operations.

4 20. As set out in September s Foreign Policy, Defence and Development Future Relationship paper 1, the UK seeks to develop a deep and special partnership with the EU that goes beyond any existing third country arrangements and which builds on the breadth and depth of our shared interests and values. In line with our position, we have encouraged Member States to develop PESCO to be open to future third State participation where there is clear value in doing so, including for the UK and our defence industry. 21. The UK has approached negotiations on the Council Decision text constructively. The most relevant articles to the UK in the text are Article 4, covering PESCO Governance, and Article 9, covering Participation of third States in individual projects. 22. In the lead up to the 11 December Foreign Affairs Council, we sought to secure key objectives within the Council Decision text to: a. Ensure third State access to PESCO; b. Allow our defence industry to be able to participate in PESCO projects after EU Exit; c. Reference the need for coherence with NATO. 23. We are satisfied that we have met the first objective. Much of the detail on third State access has been deferred to a future Council Decision text; however, we are content with the provisions in this Council Decision on allowing third State participation in line with the Notification Letter signed by the 23 Member States at the November Foreign Affairs Council (Defence). The UK has consistently called for PESCO to be open to third State participation where there is clear value in doing so. The Council Decision introduces a process whereby the Council will decide in PESCO format (i.e. after the launch of PESCO at the December Foreign Affairs Council) on the general conditions for third State participation and take decisions on whether third States should be invited to participate in individual projects. Specific arrangements will then be agreed between the third State and Member States involved in a specific project. 24. On our second objective, the UK has worked hard to ensure the interests of the UK defence industry will be protected after EU Exit. We believe it is in our mutual interests to continue to collaborate on capability projects with the EU. This is important both for our shared security and for an open and globally competitive European defence industry. As a constituent part of this industry, we wish to ensure that the UK industry is able to support PESCO projects after we leave the EU, in order that PESCO can most effectively contribute to fulfilling the EU s level of ambition. This objective will be particularly important if, over the coming years, PESCO becomes the principal format for capability cooperation in the EU. 1 Foreign policy, defence and development - a future partnership paper, 12 September 2017.

5 25. The UK reached a compromise position with EU Member States, Council Legal Service, and EEAS to agree the Council Decision text within the necessary timeframes. To address our concerns, the following statement has been entered into the minutes of the 6 December COREPER meeting: The Council Legal Service noted that in point 20 of the annex to the Council Decision establishing PESCO the requirement that cooperation programmes must only benefit entities "which demonstrably provide added value on EU territory does not limit such entities to those established in the Union. Governance arrangements for third State and their entities participation will be determined in a future Council Decision. The UK will not be part of the decision making process but we will seek to influence the modalities for future participation to enable our defence industry to join PESCO projects, where there is a clear benefit in us doing so, once we leave the EU. 26. On our third objective, we have consistently stressed the importance of EU- NATO cooperation in reference to PESCO. There are a number of proposed PESCO projects that would benefit from cooperation with NATO if they are developed. The reference to NATO can be found in the Annex of the Council Decision text and is also covered in the Notification Letter. The principle of collective defence is also covered through the reference to Article 42.7 within the Council Decision text. For the UK, NATO remains the cornerstone of Euro- Atlantic Security. We will continue to champion greater cooperation between the EU and NATO, in accordance with the 2016 Joint Declaration and Implementation Plan signed by the Presidents of the Council and Commission and the NATO Secretary General. 27. The Government s position remains that we will not support measures that would undermine Member States competence for their own military forces, or lead to competition and duplication with NATO. We and other EU Member States continue to make clear that defence remains a national competence. CONSULTATION 28. None REGULATORY IMPACT ASSESSMENT 29. Not applicable. FINANCIAL IMPLICATIONS 30. None. TIMETABLE 31. The Council Decision is scheduled to be endorsed at the European Council on 14 December.

6 Rt Hon Sir Alan Duncan MP Minister for Europe and the Americas Foreign and Commonwealth Office