Defence industry chiefs fear that new European Union rules to open up national defence procurement to all European suppliers will threaten vital investment in research and development.

The concern follows the European Parliament's adoption of new legislation on 14 January establishing a co-ordinated EU procedure for public procurement of defence and security goods and services in a bid to boost transparency and competition in this sensitive market. This covers all public service contracts between EU operators, with a minimum value of €412,000 ($545,000) for supply and service contracts, and €5.15 million for works contracts. It does not apply to intelligence-related or extra-EU contracts.

While Europe has historically exempted defence procurement from normal internal market rules, allowing governments to protect their domestic industry, the latest vote is part of a European Commission directive proposed in late 2007 to help create a single European defence market for military equipment.

But the move to encourage cross-border competition and trade, as well as transparency in defence and security markets, has come under fire from the Aerospace and Defence Industries Association of Europe (ASD), which argues that the new law could be damaging to R&D investment and the defence and technology base in Europe.

ASD secretary general François Gayet says: "To apply the logic of EU internal market rules that rigidly divide R&D and production phases is to reduce the incentives for defence capability investment by both the public and private sectors." Gayet fears that companies will no longer invest in R&D if they cannot be confident of winning contracts, while governments could cut back investment if the contract for their armed forces could be conducted elsewhere.

France, Germany, Italy, Sweden and the UK alone share 90% of the EU defence equipment market, which is worth €90 billion.

Source: Flight International