Framework Agreement between the Government of Australia and the Organisation for Joint Armament Cooperation (Organisation Conjointe de Coopération en Matière d’Armement (OCCAR)) for the Participation of Australia in OCCAR-Managed Programmes
Introduction
2.1
This Chapter examines the Framework Agreement between the Government of Australia and the Organisation for Joint Armament Cooperation (Organisation Conjointe de Coopération en Matière d’Armement (OCCAR)) for the Participation of Australia in OCCAR-Managed Programmes (the proposed Agreement). The treaty action was signed in Perth and Bonn on 5 February 2021. It was tabled in the Parliament on 15 June 2021.
OCCAR
2.2
The Organisation for Joint Armament Cooperation (OCCAR/the Organisation) was established in 1996 to facilitate cooperation in defence procurement and sustainment with the goal of improving efficiency and reducing costs.
2.3
Created initially by administrative agreement between France, Germany, Italy and the United Kingdom, OCCAR gained legal status in 2001 when the Convention on the Establishment of the Organisation for Joint Armament Cooperation (the OCCAR Convention) came into force. Belgium (2003) and Spain (2005) joined later. The Organisation is headquartered in Bonn, and as a legal entity can award contracts and employ its own staff.
2.4
The Organisation manages an annual €4 billion operating budget portfolio. It coordinates, controls and implements armament programmes assigned to it by member states (and participating states), and coordinates joint activities for future programmes. It also coordinates and plans joint research activities.
Industrial base and global balance policy
2.5
A key OCCAR objective is to improve the competitiveness of the European defence technological and industrial base by focusing on technological and industrial complementarity in relevant fields. To this end, the OCCAR Convention provides for the coordination of a number of national decisions, including:
the common industrial base and common technologies; and
capital investment in, and the use of, test facilities.
2.6
Member states also agree not to require defence industrial spending in their own jurisdiction in accordance with the value of their contribution to a particular programme.
2.7
Instead, members agree to an overall multi-programme/multi-year balance—a so-called ‘global balance’ workshare arrangement. The OCCAR Executive Administration records global balance data. It is a decision of the Board of Supervisors to consider what action, if any, might be taken to rectify an imbalance, should one occur.
Governance
2.8
The Organisation has a Board of Supervisors (BoS) and an Executive Administration (OCCAR-EA), which implements the decisions of the BoS. The BoS consists of the Defence Minister (or delegate) of each member state. If the BoS is taking a decision on a programme, only those member states participating in the programme are involved in the decision making.
2.9
Programme Boards and Programme Committees are staffed by states participating in a particular programme. Programme Boards assign activities to OCCAR by signing Programme Decisions (see below).
2.10
The Board of Auditors completes an annual audit of the OCCAR financial statements and provides an annual audit opinion to the BoS.
Programmes and participation
2.11
Under the OCCAR Convention, non-member states or international organisations may participate in programmes—non-member states participating in programmes include Finland, Sweden, Turkey, Lithuania, the Netherlands, and Poland. The Organisation also has formal relationships with the North Atlantic Treaty Organization (NATO) Support and Procurement Agency and the European Defence Agency.
2.12
Observer status is also provided for, subject to a number of requirements. Australia is an observer on three of OCCAR’s current 17 programmes (light weight torpedo, Boxer armoured vehicle, Tiger helicopter).
2.13
According to the Department of Defence, while observer status gives the Department visibility of some platform technical developments, Australia is unable to access a range of benefits including those related to costs and scheduling, and the suite of collaborative contracting arrangements with original equipment manufacturers.
Reasons for Australia to take the proposed treaty action
2.14
According to the National Interest Analysis (NIA), for nearly a decade Australia has been seeking to participate formally in OCCAR-managed programmes. Australia has a particular interest in participating in the light weight torpedo programme, and is exploring the benefits of participation in the Tiger helicopter and Boxer armoured vehicle programmes. Other programmes are also potentially of interest—though these are not identified in the NIA.
2.15
The proposed Agreement, as stated in the NIA, would facilitate access to the full benefits of formal participation in OCCAR-managed programmes, including: cost efficiencies; programme risk reduction; scheduling; promotion of global competition among suppliers; inclusion in European supply chains; and opportunities for Australian defence industries under the global balance workshare arrangements.
2.16
The Department of Defence told the Committee under the global balance workshare arrangements, ‘Australia will get access for Australian industry into those markets that we currently do not have access to. So there would only be a direct benefit for them’.
2.17
Notwithstanding opportunities that may arise under global balance workshare arrangements, participation in OCCAR-managed programmes would affect Australia’s ability to set local content requirements with regard to specific projects. In relation to this, the Department of Defence stated there would be a ‘balance’:
This [the proposed Agreement] will give us access to markets that we wouldn't have had access to in the first place … We always have the opportunity to not enter into the arrangement if we think we are not getting the outcomes that we think we could achieve. For example, if we think an OCCAR arrangement would be more detrimental than a direct arrangement, we would enter into the direct arrangement in lieu. So it's on a case-by-case basis. But I think the really big benefit is that global adjustment so that, over a period of programs, where in one instance we may have a program where we have little capacity to support from an industry perspective, in another program we may have more capacity. So it will give us the ability to direct our strengths to where we want to develop capability … There is a lot of benefit there for us …
2.18
The Department of Defence indicated Australia would also take a pragmatic approach to participating in OCCAR-managed programmes: Australia would retain the ability to choose the best path for Australia. According to the Department of Defence, OCCAR would not be the first point of call. Rather, the Department would progress through the capability lifecycle, understand Australian requirements and needs, and approach market to establish the likely source of supply. ‘In most cases’, Australia would have the ‘option to go for a direct commercial sale or through OCCAR’.
2.19
If Australia chose to pursue a project through OCCAR, it would have the ability, during negotiations establishing the implementing arrangements (see below), to influence the scope, scale and schedule. The ability to shape project outcomes through OCCAR would, according to the Department of Defence, ‘probably [be] more than we have in foreign military sales at the moment’. Nevertheless, ‘If we have specific requirements that can’t be met through that arrangement, we would be unlikely to proceed with it’.
2.20
More broadly, according to the NIA, participation in OCCAR-managed programmes would provide opportunities for the acquisition of European platforms that potentially present viable alternatives for Australian Defence Force capability requirements. Participation would also potentially increase the overall interoperability of Australian capabilities with allied defence forces, and reduce the risk of some Australian capabilities becoming ‘orphan’ capabilities in the global environment.
2.21
The Department of Defence stated it was of the view:
… of the respective selected defence capability requirements … OCCAR offers Australia the opportunity to realise cheaper, superior equipment which is better integrated in supply chains of allied defence forces. Our participation will add to a more competitive global defence industry environment.
2.22
The Department of Defence also identified strategic considerations, including that the proposed Agreement, which it stated raised no sensitive international defence policy issues, would further strengthen Australia’s ‘multinational and bilateral defence relationships with like-minded nations in Europe’.
Obligations
Participation
2.23
Under the proposed Agreement, Australia would request participation in a programme in accordance with the OCCAR Rules. Australia’s integration in an OCCAR-managed programme would start with the approval by the BoS of the Programme Management Authorisation which provides for the management of the programme by OCCAR. States participating in a programme enter into a programme Memorandum of Understanding (MOU) that sets out the provisions for participation. Involvement in a programme is operationalised through ‘implementing arrangements’.
2.24
An ‘implementing arrangement’ under the proposed Agreement means a ‘Programme Decision’ signed by Australia and by which Australia participates in an OCCAR-managed programme in accordance with the provisions of the proposed Agreement.
2.25
The programme decision is the formal tasking instrument for OCCAR. Typically, a programme decision will define the scope, high level objectives, and the organisation and management of the programme. It includes the commitments of the participating states. An OCCAR-managed programme typically consists of a series of programme stages (sometimes running in parallel), and each is covered by a dedicated programme decision.
2.26
Implementing arrangements are multiple documents that together set out the scope of a country’s participation in a programme, including any particular requirements, off-take, and financial obligations. By signing an implementing arrangement, Australia would become legally bound to the programme, including the financial commitments and budget; and to the programme high level objectives.
2.27
Implementing arrangements do not carry the status of treaties within the meaning of the Vienna Convention on the Law of Treaties 1969.
Financial commitments and budgets
2.28
Australia would have financial commitments (to be paid in Euro) to administrative and operational budgets. Administrative costs would include contributions to the OCCAR-EA Central Office for the integration of Australia into an OCCAR-managed programme. For programmes in which Australia would participate, Australia would be required to contribute to the OCCAR Administrative Budget up to a calculated maximum.
2.29
Australia would also have a contribution to the operating costs (that is, the cost of procuring or sustaining the particular piece of equipment) of programmes in which it would be participating. This contribution would be consistent with and up to the Operational Maximum Financial Commitment calculated in accordance with OCCAR Rules. The amount would be established in the relevant implementing arrangement.
2.30
The costs related to common elements under the operational budget would be shared and specified in the relevant implementing arrangement. The costs related to non-common elements would be borne by the participating states which generated them.
2.31
The programme costs would depend on the programme itself. Price investigations, cost forecasting, and price audits would be carried out in accordance with OCCAR Rules.
2.32
Through implementing arrangements, the authority for the OCCAR-EA to negotiate, award and administer programme contracts in the name and/or on behalf of Australia would be specified. Under this arrangement, Australia and the programme contractor would be parties to the programme contract(s).
Security of information
2.33
The proposed Agreement would establish requirements for the security of information. The NIA acknowledged that participation in programmes by Australia would likely entail the exchange or generation of classified information. Under the proposed Agreement, classified information would be used, handled and protected in accordance with the Parties’ applicable security laws and/or regulations, including the OCCAR Rules, and the OCCAR-Australia Security Agreement for the Protection of Classified Information. According to the NIA:
If Australia shares Classified or Unclassified Sensitive Information with OCCAR, OCCAR shall not disclose, use or permit the disclosure of the information without Australia’s prior written consent. Similarly, Australia would also be required not to disclose, use or permit the disclosure of Classified or Unclassified Sensitive Information that it has received from OCCAR without OCCAR’s prior written consent.
Intellectual property
2.34
Under the intellectual property (IP) provisions, OCCAR would be required, through its negotiation and award of programme contracts, to secure rights sufficient to manage the programme and as specified in the relevant OCCAR programme MOU. According to the NIA, this would ensure Australia had sufficient rights for required uses, and would allow for authorised disclosure of information to third parties and IP rights.
Programme Boards and Committees
2.35
For OCCAR-managed programmes with Australian participation, Australia would participate in the relevant Programme Boards and Programme Committees that manage the programmes. Implementation would be led by the Department of Defence.
2.36
The Australian representative would be the Department of Defence Deputy Secretary Capability Acquisition and Sustainment Group, or authorised delegate, who would be required to have the authority to decide on all matters within the responsibility of the relevant Programme Board or Programme Committee.
Reporting
2.37
The OCCAR-EA would be required to provide Australia with reports on the progress of programmes, and any matter that might have an impact on the achievement of any high level objectives. In accordance with the OCCAR Rules, this reporting must be relevant, concise, and timely.
Implementation
Entry into force, amendment, duration and termination
2.38
Under the proposed Agreement, each Party is required to notify the other of the completion of its internal procedures required to bring the proposed Agreement into force. The proposed Agreement would enter into force on the date of signature of the last note. The proposed Agreement was signed on 5 February 2021 and OCCAR expects it to enter into force after Australian ratification.
2.39
According to the NIA, the Parliament’s approval would be sought to amend the International Organisations (Privileges and Immunities) Act 1963 to allow the granting of privileges and immunities to OCCAR and its staff. Until such time as privileges and immunities are granted in accordance with Annex I of the OCCAR Convention, there can be no Australian-located programme divisions, programme meetings or prime contractors, or Australian nationals recruited as OCCAR staff members.
2.40
However, as OCCAR would not be expected to undertake significant activities in Australia, the NIA foreshadowed that the operation of the privileges and immunities would be limited.
2.41
The proposed Agreement would operate for an initial period of 10 years, and would continue in force thereafter unless terminated. The proposed Agreement could be amended at any time by mutual agreement in writing.
2.42
The Parties would be permitted to terminate the proposed Agreement by mutual agreement in writing, or one Party may terminate the agreement unilaterally by providing six months written notice of their intention to terminate. Depending on the circumstances of termination, there are provisions for the management of the termination. For instance, where one Party terminates the proposed Agreement, all costs resulting from the termination would be borne by the terminating Party, subject to some limitations.
2.43
Regardless of the manner in which it might occur, the termination of the proposed Agreement and any subsequent implementing arrangements would not release Parties from the execution of obligations resulting from its implementation concerning: security of information, disputes, financial commitments and budgets, and liabilities.
Costs
2.44
According to the NIA, the costs of Australian participation in an OCCAR-managed programme would be negotiated on a programme-by-programme basis and set out in an implementing arrangement.
2.45
The Department of Defence confirmed to the Committee ‘[t]here’s no price to membership at this stage. There’s no financial commitment’. However,
When we go into an implementing arrangement for a particular contract, those details will be worked through then on each implementing arrangement on a value-for-money basis for us as we go forward. This framework agreement sets the conditions for us to move forward on, but there's no financial commitment at this stage.
Conclusion
2.46
The Committee recognises the Australian Defence Force must have access to materiel that meets its specific needs and operational requirements, and that the proposed Agreement would establish another avenue for the Department of Defence to acquire necessary capability and provide for its sustainment.
2.47
By participating in cooperative acquisition and sustainment programmes under the proposed Agreement, Australia would stand to gain significantly from expertise in research and development, economies of scale, risk reduction, and other systemic efficiencies. Strategically, participation would increase interoperability with the defence forces of other like-minded nations.
2.48
The Committee is mindful, however, that any decision to join an OCCAR-managed programme must be based on a thorough analysis of Australia’s particular needs and interests, and this includes building and supporting local defence capability and supply chains. Evidence to the Committee suggested the Department of Defence is similarly cognisant of these matters.
2.49
Accordingly, the Committee is of the view ratifying the proposed Agreement is in Australia’s national interest.
2.50
The Committee supports the Framework Agreement between the Government of Australia and the Organisation for Joint Armament Cooperation (Organisation Conjointe de Coopération en Matière d’Armement (OCCAR)) for the Participation of Australia in OCCAR-Managed Programmes, and recommends that binding treaty action be taken.