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On April 18, 2019, the European Parliament gave its green light to the proposal for a regulation of the European Parliament and of the Council establishing the European Defense Fund. Its main objective is to foster the competitiveness, efficiency and innovation capacity of the European defense technological and industrial base, contributing to the EU’s strategic autonomy and freedom of action (article 3).

The regulation stems from the commitment expressed by the Commission in the European Action Plan (November 30, 2016) to foster a competitive, innovative and efficient European defense industry, and to promote the internal market uptake of European defense products and technologies, thus increasing the non-dependency on non-EU sources. The Commission proposed the creation of a European Defense Fund with a budget of EUR 13 billion for 2021-2027.

The regulation supports the development of a new generation of defense systems and technologies to increase cooperation between Member States in defense equipment investments (second recital). It also enhances the technological autonomy of the Union’s defense industry (third recital).

In this regard, the regulation allows the participation of non-EU companies in the actions to be financially supported by the fund, subject to one condition: intellectual and industrial property rights arising from R&D actions, as well as their results, must remain with the recipient during and after the action and must not be subject to export controls or restrictions by third countries.

The importance of intellectual and industrial property rights is also evident in the award criteria, In particular, each proposal will be assessed, among other things, on the basis of its “contribution to the autonomy of the European defense technological and industrial base, including by increasing the non-dependency on non-EU sources and strengthening security of supply (…)” (article 13(d)).

The adoption of this proposal has been controversial. On May 1, 2019, the United States (US) expressed disagreement with the increasing integration of a common arms market in the EU. In a letter to the EU High Representative for Foreign Policy, it outlines the potential economic and political consequences for the EU if it continues to invest and develop arm programs without the participation of third countries like the US.

The US has also shown concern over the Permanent Structured Cooperation (PESCO) adopted on December 11, 2017. The aim of PESCO is to deepen defense cooperation among EU Member States and to jointly develop defense capabilities and make them available for EU military operations. In this context, 25 Member States decided to participate in 34 armament projects. The participation of third countries in PESCO projects must be unanimously approved, which facilitates a veto over US participation.

According to the US, the EU’s action poses a risk to the cooperation and integration of the arms industry since the establishment of NATO in 1949 after the end of World War II—hence the proposal to modify the provisions on intellectual and industrial property, export controls and the right of veto in PESCO regulation.

Among other consequences, the US warns of vetoing European projects, which would have a major economic impact. Also, European companies active in the US market might decide not to participate in PESCO and European Defense Fund projects to avoid isolating their intellectual property within the EU or falling afoul of US export control regulations.

As can be seen, technology and intellectual and industrial property have recently become the focus of attention in the defense sector.

Autores: Marta Zaballos y Álvaro Bourkaib

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