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Document JOC_2001_270_E_0119_01

Proposal for a Council Regulation on the establishment of the Galileo Joint Undertaking (COM(2001) 336 final — 2001/0136(CNS))

OJ C 270E , 25.9.2001, p. 119–124 (ES, DA, DE, EL, EN, FR, IT, NL, PT, FI, SV)

52001PC0336

Proposal for a Council Regulation on the establishment of the GALILEO Joint Undertaking /* COM/2001/0336 final - CNS 2001/0136 */

Official Journal 270 E , 25/09/2001 P. 0119 - 0124


Proposal for a COUNCIL REGULATION on the establishment of the GALILEO Joint Undertaking

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. The GALILEO satellite radionavigation programme

Satellite radionavigation is a technology consisting in the transmission in orbit of signals which indicate the time extremely accurately. A receiver picking up the signals from a constellation of several satellites can then determine very accurately at any given moment not only the exact time but also the user's position in terms of longitude, latitude and altitude.

This technology is notching up success after success and day by day it is finding new applications. Their uses and markets extend to a multitude of public and private sector activities, e.g. transport (positioning and measurement of the speed of vehicles, insurance, etc.), telecommunications (signals for network integration, banking interconnections, connection of electricity networks), customs (field investigations, etc.), and agriculture (geographical information systems).

This technology therefore has a clear strategic importance, and it is likely to generate considerable economic benefits.

At present, however, the only systems in existence are the GPS in the United States and GLONASS in Russia, both of which are funded and controlled by the military authorities, with the result that their signals can be blocked or jammed at any time to safeguard the national interest.

The European Union cannot afford to be completely dependent on a third country in such a strategic area.

That is why, as requested by the Council in March 1998, the Commission put forward in its Communication of 10 February 1999 [1] an independent satellite radionavigation programme, to be known as GALILEO, to be developed in four phases: definition in 2000, development by 2005, deployment by 2007 and operation and exploitation after that.

[1] COM(1999) 54 final, 10.2.1999.

The Cologne European Council in 1999 and the Feira and Nice European Councils in 2000 stressed the strategic importance of GALILEO.

Emphasising both the need to give a positive boost to European industries and services and to ensure Europe's independence in such a vital technology, the Council, in its Resolution of 19 July 1999 [2], asked the Commission to develop a system for civil use worldwide to be managed by civilian public authorities and offering significant added value compared with existing systems while remaining compatible with them.

[2] OJ C221, 3.8.1999, p.1.

The development of a satellite radionavigation system was included in the 4th and 5th R&D Framework Programmes which made it possible to fund the first research contracts and feasibility studies.

In addition, in their Decision of 23 July 1996 [3] on Community guidelines for the development of the trans-European transport network, the European Parliament and the Council included navigation and positioning systems as integral parts of the network and also included related projects as projects of common interest.

[3] Parliament and Council Decision No 1692/96/CE, OJ L 228, 9.9.1996.

Support by means of appropriations from the trans-European transport networks was, in particular, based on Article 4(g) of the abovementioned Decision of 23 July 1996 which explicitly provides for the possibility of funding research and development activities.

In the Regulation on the granting of financial aid in the field of trans-European transport networks of 19 July 1999 [4], the two Institutions also raised the rate of the Community contribution to navigation and positioning projects to 20%, giving them clear priority.

[4] Parliament and Council Regulation (EC) No 1655/99 amending Regulation (EC) No 2236/95, OJ L 197, 29.7.99, p.1.

With the backing of a large majority of countries on all continents which have supported the development of GALILEO as a European system compatible with the existing systems, the European Community took steps to ensure that the necessary frequencies were reserved at the World Radio Communications Conference held in Istanbul in May 2000.

During the definition phase, which was completed at the end of 2000, the Commission and the European Space Agency mobilised much of the European space industry as well as potential service providers to define the basic components of the project.

In order to successfully complete the development phase (2001-2005) which should be financed to the extent of EUR1.1 billion from public funds which are already earmarked and are to be split equally between the budgets of the European Community and the European Space Agency, a single management structure should be established for the Programme.

The Joint Undertaking to be set up should ensure the smooth development of the programme and the continuation of the research and development efforts, bring together the public and private sector funding needed, and prepare for the management of the deployment and operational phases of the programme, including its transformation into another legal structure which could take the form of a European company. The European Space Agency will contribute to this development phase through its optional navigation programme and will have special responsibility for implementing this phase as regards research and development for the space segment and the earth segment associated with the system.

This was confirmed in the clearest possible terms by the Stockholm European Council (23 and 24 March 2001) which "invited the Council to define the arrangements necessary for launching the next phase of the project, including establishing a single and efficient management structure before the end of 2001, be it a Joint Undertaking under Article 171 of the Treaty, an agency, or another suitable body" and by the Transport Council in its Resolution of 5 April 2001.

The Stockholm European Council also noted that "the private sector is ready to supplement the public budgets for the development phase". The representatives of the main industries concerned signed a Memorandum of Understanding in March 2001 whereby they committed themselves to indicating their contribution to the total amount of EUR200 million for the development phase of GALILEO by subscribing to the capital of the Joint Undertaking or contributing in some other form, e.g. by concluding a contract.

To this end, the Commission is proposing the establishment of a Joint Undertaking on the basis of Article 171 of the Treaty establishing the European Community.

2. Why opt for a Joint Undertaking-

The aim is to ensure a single management structure for the Galileo programme and, to this end, to mobilise in one and the same legal entity all the funds assigned to the programme which, as things stand at present, essentially concerns the European Community and the European Space Agency. For this purpose, it is necessary to have a flexible structure with legal personality that is capable of concluding the contracts needed to establish a European satellite radionavigation system, and step up the necessary research and technological development efforts.

However, the structure will not have regulatory powers in the field of satellite radionavigation. These will be exercised by the Commission, the Council and even Parliament in accordance with their respective responsibilities.

Since GALILEO comprises a major research and development component, based on the 4th and 5th R&D framework programmes and the trans-European transport networks, and, additionally, this programme will make it possible to make considerable progress in the development of satellite navigation technologies, there are clear grounds for having recourse to Article 171 of the Treaty establishing the European Community in order to establish a Joint Undertaking for the duration of the programme development phase which should be completed by the end of 2005.

Several solutions were engaged, including the creation of a Community agency, which was not agreed on for the following reasons:

- It would have been impossible to allow the participation of the private sector in an agency, in particular because the latter does not have capital capable of receiving assets brought in by the private sector, except if, alongside the agency, a fund were to be set up bringing together the public and private funds assigned to GALILEO.

- It would have been very difficult (and therefore very time-consuming) to ensure the participation of the European Space Agency in a Community agency, given the legal obstacles involved.

3. Content of the Commission's proposal

The Commission's proposal comprises a proposal for a Council Regulation establishing the Joint Undertaking and adopting its Statutes which are annexed to the proposal.

Article 1 of the Council Regulation specifies that the seat of the Joint Undertaking will be located in Brussels.

Article 2 of the Council Regulation Article 5 confers legal personality on the Joint Undertaking so that it can contract and effect all the legal operations needed to achieve its object. In the interest of legal certainty, this provision is also included in Article 5 of the Statutes.

Article 1 of the Statutes provides that the European Community, represented by the European Commission [5], and the European Space Agency will be founder members of the Joint Undertaking, and that the European Investment Bank, and private undertakings which have subscribed to the initial capital of the Joint Undertaking to the extent of a minimum amount of EUR 20 million may become members. This minimum amount is intended to ensure a substantial - and not a symbolic - private-sector participation in the development phase. It will, however, be reduced to EUR1 million for small and medium-sized enterprises, as defined in the Commission recommendation of 3 April 1996, which subscribe to the capital of the Joint Undertaking individually or collectively.

[5] For the record, the initial subscriptions of the European Community and the European Space Agency will each be EUR50 million.

The capital brought into the Joint Undertaking will be subscribed by the founding members when it is set up or by a new member when it joins. An advantage will be conferred on private undertakings which subscribe within thirty days of the offer made to them by the founding members immediately after the establishment of the Joint Undertaking: they need only subscribe one quarter of the minimum required in Article 1(3), fourth indent, i.e. EUR5 million (EUR250 000 for small and medium-sized enterprises), provided that the balance of their contribution is subscribed before 31 December 2002. This derogation will therefore not apply to undertakings which join the Joint Undertaking after it has been set up.

The Administrative Board will decide upon the amounts of capital to be released each year by each member in proportion to the share of the capital which they subscribe. Assets in kind can be brought in. They will have to be the subject of an independent evaluation of their value and their utility for carrying out the activities of the Joint Undertaking. Any member of the Joint Undertaking which which does not release the amount due within the prescribed time-limits or fails to meet its commitments concerning the bringing-in of assets in kind will be disqualified from voting in the Administrative Board until such time as its obligations have been met.

Article 2, which concerns the activities of the Joint Undertaking, states that the object of the Joint Undertaking is to set up a satellite radionavigation system for the technological development phase.

Article 2(1) sets out the two main tasks of the Joint Undertaking which are expanded upon in the following paragraphs:

- overseeing the implementation of the development phase;

- preparing for the subsequent phases of the programme.

Article 2(2) refers to the implementation of the development phase which will be entrusted by agreement to the European Space Agency with regard to the space segment and the associated earth segment. It should be noted that this agreement will also set out the detailed rules for supervision and monitoring of the activities entrusted to the European Space Agency and the coordination of the activities carried out directly by the European Space Agency from the funds at its disposal and not directly assigned to the development phase.

This agreement will also determine how the European Space Agency's optional navigation programme will be implemented.

However, certain activities will remain the responsibility of the Joint Undertaking, in particular technical support for the standardisation and certification process and support for the international negotiations to be conducted by the European Community.

Article 2(3) sets out the different stages provided for in the Council Resolution of 4 April 2001 to ensure that the private sector is involved to a very large extent in the financing of the programme deployment phase. The Joint Undertaking, which should in principle be wound up, in accordance with Article 20 of the Statutes, at the end of the development phase, should also prepare the structures intended to ensure the management of the deployment and operational phase. In particular it will ensure that private undertakings which have subscribed to the capital of the Joint Undertaking enjoy preferential treatment in becoming members of the entity which will be responsible for the deployment and operation of the system, in order to encourage them to participate in the Joint Undertaking.

Article 3 specifies that the Joint Undertaking will entrust, by agreement, to the European Space Agency the carrying-out of activities needed during the development phase with regard to the space segment and the associated earth segment. The Joint Undertaking will make the necessary funds available to the European Space Agency which will administer them in accordance with procedures to be set out in the agreement. Provision is also made for the Joint Undertaking to reserve the right to adjust the agreement in the light of developments occurring during the development phase. The agreement will also cover activities launched by the European Space Agency financed from funds not assigned to the Joint Undertaking.

Article 4 specifies that, in order to carry out the tasks provided for in Article 2(3), the Joint Undertaking may, following an invitation to tender, conclude a contract for the provision of services with private undertakings or a consortium of private undertakings.

Pursuant to Article 6, the Joint Undertaking will own all the tangible and intangible assets created or transferred to it for the development phase, in particular the results of the definition phase.

Articles 7 - 10 describe the bodies of the Joint Undertaking: the Administrative Board (which may, where appropriate, consult an Advisory Committee), the Executive Committee and the Director.

The Administrative Board will be made up of the members of the Joint Undertaking (Article 7), i.e., when it is set up, its founding members. The Commission and the European Space Agency will each have 30 votes and the other members will have a number of votes in proportion to the share of the capital they have subscribed.

Decisions will be taken by a simple majority of votes, except in the following cases where a majority of 75% of the votes will be required: Articles 8 (major changes in the implementation of the programme). 13 (adoption of the budget), 14 (adoption of the financial regulations), 18 (accession by new members), 20 (winding-up of the Joint Undertaking) and 22 (amendments to the Statutes)

The Chairman of the Administrative Board will be appointed from among its members.

The Director and a representative of the Executive Committee - who is not necessarily a member of the Administrative Board - will attend its meetings.

Article 8(2) describes the functions of the Administrative Board which is the body which will take all the strategic Decisions on programming, financial and budgetary matters. The Commission will ensure in particular, pursuant to paragraph 2.b, 8th indent, that there is significant representation for the sector of applications likely to use GALILEO. In addition, acting on a proposal from the Commission, the Administrative Board will appoint the Director of the Joint Undertaking and approve its organisation chart.

The Executive Committee (Article 9) will consist of three members: a representative of the European Commission, a representative of the European Space Agency, and a representative designated by the Administrative Board from the private sector. The Director will attend its meetings.

Paragraph 2 describes the functions of the Executive Committee to which the Administrative Board may entrust or delegate tasks that it considers necessary in order to allow more flexible management of the Joint Undertaking. It goes without saying that the Executive Committee will work in close coordination with the Director who will attend its meetings. These meetings will be held at least twice a month.

The Director (Article 10), who will be designated the Administrative Board acting on a proposal from the Commission, will be the legal representative of Joint Undertaking and will ensure its day-to-day management under the direct supervision of the Executive Committee. He will direct the staff of the Joint Undertaking in accordance with directives issued by the Administrative Board. He will draw up for the latter the various documents and reports provided for in the Statutes (organisation chart, development plan, budget, balance-sheet, annual report and any other document judged necessary).

Article 11 concerns the staff of the Joint Undertaking the Director of which will be designated by the Administrative Board while the other members will be designated on the basis of procedures to be established by the Administrative Board. Members of staff will be recruited by the Director on fixed-term contracts concluded with the Joint Undertaking which will be based on the conditions of employment of other servants of the European Communities.

Article 12 provides that the Joint Undertaking will not distribute any surplus revenue to its members, except in the event of winding-up, such surplus being automatically reassigned to its budget.

Articles 13-15, which concern the financial management of the Joint Undertaking, establish procedures concerning the drawing-up of the budget and the annual accounts. In parallel, Article 14 provides for the drawing-up of a development plan and an annual report so that, with those four documents, the members of the Joint Undertaking can have a complete picture of the situation of the Joint Undertaking.

Article 17 concerns the question of the contractual and non-contractual liability of the Joint Undertaking. It should be noted that the Joint Undertaking, which will have legal personality, will be responsible for its acts, and its members will not be liable in this connection.

Article 18 concerns the accession of new members, which will be decided upon by the Administrative Board acting by a majority of 75% of the votes.

Article 19 provides that the Joint Undertaking is to be set up for four years, which means that it will be wound up towards 2005, i.e. at the beginning of the deployment phase which marks the end of the preponderance of public funding and the development phase which justifies recourse to Article 171 of the Treaty. This period may, however, be extended by amending the Statutes in accordance with Article 22. The Joint Undertaking cannot, in any event, be wound up before the obligations deriving from the agreement to be concluded with the European Space Agency pursuant to Article 3 have been met.

Article 20 provides that, in the event of winding-up, the Administrative Board of the Joint Undertaking will designate one or more liquidators who will act according to its instructions. However, it will be necessary to determine the use of the tangible and intangible assets, and in particular industrial property rights, owned by the Joint Undertaking. They should in principle be transferred to the structure set up for the deployment phase.

Article 21 provides that any matter not covered by the Statutes will be covered by the law of the State where the undertaking has its seat.

The Statutes of the Joint Undertaking may be amended in accordance with the procedure laid down in Article 22.

2001/0136 (CNS)

Proposal for a COUNCIL REGULATION on the establishment of the GALILEO Joint Undertaking

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community and in particular Article 171 thereof,

Having regard to the proposal from the Commission [6],

[6] OJ C , , p. .

Having regard to the Opinion of the European Parliament [7],

[7] OJ C , , p. .

Having regard to the Opinion of the Economic and Social Committee [8],

[8] OJ C , , p. .

Whereas:

(1) On 13 January 1999 the European Parliament adopted a Resolution on the Commission Communication to the Council and the European Parliament "Towards a trans-European positioning and navigation network" comprising a "A European strategy for a Global Navigation Satellite System (GNSS)" (COM(98)29 final, 21.1.1998).

(2) On 10 February 1999 the Commission adopted a Communication "GALILEO - involving European in a new generation of satellite navigation services" (COM(99)54 final, 10.2.1999).

(3) The conclusions of the European Council meetings held in Cologne (3 and 4 June 1999), Feira (19 and 20 June 2000), Nice (7 to 11 December 2000), and Stockholm (23 and 24 March 2001) make reference to GALILEO.

(4) On 19 July 1999 the Council adopted a Resolution on involving Europe in the new generation of satellite navigation services - GALILEO - Definition phase (OJ C 221/1, 3.8.1999).

(5) On 22 November 2000 the Commission adopted a Communication to the European Parliament and the Council on GALILEO (COM(2000)750 final, 22.11.2000).

(6) The Council adopted a resolution on GALILEO on 5 April 2001.

(7) The first research contracts and feasibility studies were funded under the 4th and 5th framework programmes for research and development.

(8) The technological development phase was funded from the appropriations assigned to the trans-European transport networks on the basis of Article 4(g) of the Decision of the Council and of the European Parliament of 23 July 1996, [9] which provides for the possibility of funding for research and development, and Article 17 of Council Regulation (EC) No 2236/95 of 18 September 1995 laying down general rules for the granting of Community financial aid in the field of trans-European networks. [10]

[9] Decision No 1692/96/EC of the European Parliament and of the Council of 23 July 1996 on Community guidelines for the development of the trans-European transport network (OJ L 228, 9.9.1996).

[10] OJ L 228, 23.9.1995.

(9) At the beginning of 2001, the management of the GALILEO satellite navigation programme entered its development phase aimed at verifying and testing the assumptions made during the definition phase, in particular with regard to the various components of the architecture of the system [11].

[11] The results of the definition phase are set out in the Commission Communication to the European Parliament and the Council on GALILEO (COM (2000)750 final, 22.11.2000).

(10) The development phase will be followed by the deployment phase consisting in the production of satellites and terrestrial components, satellite launching and the installation of terrestrial stations and equipment in order to enable the system to be operational in 2008.

(11) Taking into account the number of players who will need to be involved in this process, and the financial resources and technical expertise needed, it is vital to set up a legal entity capable of ensuring the coordinated management of the funds assigned to the GALILEO programme during its development phase.

(12) The Stockholm European Council noted that "the private sector is ready to supplement the public budgets for the development phase". The representatives of the main industries concerned signed a Memorandum of Understanding in March 2001 whereby they committed themselves to indicating their contribution to the total amount of EUR200 million for the development phase of GALILEO by subscribing to the capital of the Joint Undertaking or contributing in some other form -.

(13) That it why it is necessary to set up a Joint Undertaking under Article 171 of the Treaty establishing the European Community, since the GALILEO involves a major research and development component which justifies and will continue to justify the use of funds assigned to the research and development framework programmes. In addition, this programme will make it possible to make considerable progress in the development of satellite navigation technologies.

(14) The Joint Undertaking's main task will be to successfully complete the development of the GALILEO programme during its development phase by combining public and private sector funding; in addition, it will make it possible to ensure the management of major demonstration projects,

HAS ADOPTED THIS REGULATION:

Article 1

For the implementation of the GALILEO satellite radionavigation programme, there shall be established a Joint Undertaking within the meaning of Article 171 of the Treaty establishing the European Community for a period of four years.

Its aim shall be to ensure a single management structure for the research, development and demonstration phase of the GALILEO programme, and to this end mobilise the funds assigned to this programme.

Its seat shall be located in Brussels.

Article 2

The Joint Undertaking shall have legal personality. In all the Member States of the European Community, it shall enjoy the most extensive legal capacity accorded to legal persons under the laws of those States. It may, in particular, acquire or dispose of movable and immovable property and be a party to legal proceedings.

Article 3

The Statutes of the GALILEO Joint Undertaking, annexed to this Regulation, are hereby adopted.

Article 4

The Protocol on Privileges and Immunities shall apply to the Joint Undertaking

Article 5

This Regulation shall enter into force on the [...] day following that of its publication in the Official Journal of the European Communities.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels,

For the Council

The President

ANNEX

Statutes of the GALILEO Joint Undertaking

Article 1

1. The name of the Joint Undertaking shall be: "GALILEO Joint Undertaking".

2. Its seat shall be located in Brussels.

3. a. The following shall be founding members of the Joint Undertaking:

- the European Community represented by the European Commission, which will bring in a maximum of EUR 520 million;

- the European Space Agency, which will bring in a maximum of EUR 550 million, of which EUR 50 million in cash and EUR 500 million in kind in accordance with the third indent of Article 3;

b. The following may become members of the Joint Undertaking

- the European Investment Bank;

- any undertaking which subscribes a minimum of EUR 20 million to the Joint Undertaking. That amount shall be reduced to EUR 1 million for undertakings subscribing individually or collectively which may be regarded as small and medium-sized enterprises within the meaning of the Commission Recommendation of 3 April 1996 concerning the definition of small and medium-sized enterprises. [12]

[12] OJ No L 107, 30.4.1996.

4. Its capital shall be made up of assets brought in by its members. Assets in kind may be brought in. They shall be the subject of an evaluation of their value and their utility to the carrying-out of the activities of the joint undertaking.

The founding members shall subscribe their shares of the capital to the extent of the amounts indicated in their respective commitments of ... :for the European Community: EUR ...; for the European Space Agency: EUR ....

Immediately after they have subscribed their shares, the founding members shall invite the other members mentioned in paragraph 3.b to subscribe their shares within a period of 30 days. Private undertakings need subscribe only EUR5 million and EUR250 000 respectively if the balance is subscribed before 31 December 2002.

The Administrative Board shall decide upon the amounts of this capital which should be released in proportion to the share of the capital subscribed by each member.

Any member of the Joint Undertaking which fails to meet its commitments concerning the bringing-in of assets in kind or which does nor release the amount due within the prescribed time-limits shall be disqualified from voting in the Administrative Board until such time as its obligations have been met.

Article 2

The object of the Joint Undertaking shall be to set up a European satellite radionavigation system.

1. It will oversee the implementation of the programme development phase and prepare the deployment phase.

2. It will, through the European Space Agency in accordance with Article 3 of these Statutes, launch the research and development activities needed to successfully complete the phase of development and coordination of national activities in this area; it will, through the European Space Agency in accordance with Article 3 of these Statutes, launch a first series of satellites to finalise the technological developments that have occurred and ensuring the large-scale demonstration of the capabilities and reliability of the system.

3. It will mobilise the public and private sector funds needed and set up the management structures for the various successive phases of the programme:

- It will draw up a business plan covering all the phases of the programme on the basis of data to be supplied by the European Commission concerning the services that can be offered by GALILEO, the revenue that they may generate and the necessary accompanying measures; it shall ensure that private undertakings which have participated in the Joint Undertaking enjoy preferential treatment in becoming members of the entity which will be responsible for the deployment and operation of the navigation system.

- On that basis, it will contact the private sector, in the way that it considers to be the most appropriate, in order to draw up before the end of 2002 an overall plan for the financing of the programme including in particular the arrangements for financial participation by the private sector during the deployment phase.

- On the basis of these elements, it will prepare the establishment of the structure or structures which will, on the one hand, take responsibility for implementing the programme deployment phase and, on the other, ensure the maintenance of the system.

Article 3

The Joint Undertaking shall conclude with the European Space Agency an agreement by which:

- it entrusts to it the carrying-out of the activities required during the development phase with regard to the space segment and the earth segment associated with the system, and to that end it shall make available the funds at its disposal for that phase. The European Space Agency will be responsible for administering them in accordance with procedures to be set out in the agreement to be concluded with the Joint Undertaking and based on the principles of non-discrimination, transparency and fair distribution of work, taking into account the Community character of the programme. The Joint Undertaking will supervise the carrying-out of those activities and shall reserve the right to propose any necessary adjustments in the light of developments occurring during the development phase;

- the European Commission shall have the right to ensure that the financial interests of the Community are protected by carrying out effective controls. Should the Commission discover any irregularities, it shall reserve the right to reduce or suspend any subsequent payment to the Joint Undertaking. The reduced or suspended amount shall be equivalent to the amount of the irregularities actually discovered by the Commission Any disputes shall be settled on the basis of the provisions of the agreement;

- the procedures for carrying out the GALILEO programme are defined, and in particular, the activities launched by the European Space Agency relating to the programme and financed from funds not assigned to the Joint Undertaking.

Article 4

Without prejudice to Article 3, the Joint Undertaking may, following an invitation to tender, conclude a contract for the provision of services with private undertakings or a consortium of private undertakings, in particular to carry out the activities provided for in Article 2(3).

The Joint Undertaking shall ensure that the contract provides for the right of the Commission to carry out, on behalf of the Joint Undertaking, controls in order to ensure that the financial interests of the Community are protected and, in the event of the detection of irregularities, to impose dissuasive and proportionate penalties.

Article 5

The Joint Undertaking shall have legal personality. In all the Member States of the European Community, it shall enjoy the most extensive legal capacity accorded to legal persons under the laws of those States. It may, in particular, acquire or dispose of movable and immovable property and be a party to legal proceedings.

Article 6

The Joint Undertaking shall own all the tangible and intangible assets created or transferred to it for the development phase of the GALILEO programme.

Article 7

1. The bodies of the Joint Undertaking shall be the Administrative Board, the Executive Committee and the Director.

2. The Administrative Board may seek the advice of an Advisory Committee.

Article 8

1. Composition of the Administrative Board, voting rights

a. The Administrative Board shall be composed of the members of the Joint Undertaking.

b. Unless otherwise provided in these Statutes, decisions of the Administrative Board shall be adopted by a simple majority of a the votes cast. The Commission and the European Space Agency shall each have 30 votes. The other Members of the Joint Undertaking shall have a number of votes in proportion to the share of the capital subscribed by them

c. The provisions of subparagraph b. of this paragraph shall apply only from the date of admission of the first new member. Until that date, all decisions of the Administrative Board shall be taken unanimously.

2. Functions of the Administrative Board

a. The Administrative Board shall take the decisions necessary for implementing the programme and exercise overall supervision of the execution of the programme.

b. In particular, the Administrative Board shall:

- nominate the Director and approve the organisation chart;

- adopt the financial regulations of the Joint Undertaking in accordance with Article 14(4);

- in accordance with Article 13, approve the annual budget, including the staff establishment plan, the development plan for the programme development phase ,and the programme cost estimates;

- approve the annual accounts and balance-sheet;

- decide on any acquisition, sale and mortgaging of land and other titles to real property, as well as on the giving of any sureties or guarantees, the taking-out of shares in other undertakings or institutions, and on any granting or taking of loans;

- approve, by a majority of 75% of the votes, any proposal involving a significant change in the implementation of the GALILEO programme;

- adopt the annual reports on the current status of the programme and its financial situation referred to in Article 15(2);

- exercise such other powers and perform such other functions, including the establishment of subsidiary bodies, as may be necessary for the purposes of the programme.

- adopt the terms of reference of the Executive Committee.

3. Meetings, rules of procedure of the Administrative Board

1) The Administrative Board shall meet at least twice a year. Extraordinary meetings shall be convened at the request of either one-third of the members of the Administrative Board representing at least 30% of the voting rights or its Chairman or the Director. The meeting shall normally take place at the seat of the Joint Undertaking. The Administrative Board shall elect its Chairman from among its members. Unless otherwise decided in particular cases, a representative of the Executive Committee and the Director shall participate in the meetings.

2) The Administrative Board shall adopt its rules of procedure.

Article 9

1. Composition of the Executive Committee, voting rights

- The Executive Committee shall be composed of a representative of the European Commission, a representative of the European Space Agency, and a representative designated by the Administrative Board; it shall meet in the presence of the Director.

- Decisions of the Executive Committee shall be taken unanimously.

2. Functions of the Executive Committee

The Executive Committee shall assist the Administrative Board in the preparation of its decisions and shall undertake any other tasks which the Administrative Board may entrust to it.

The Executive Committee shall in particular:

- advise the Administrative Board and the Director on the status of the programme on the basis of regular reports;

- comment and make recommendations to the Administrative Board on the programme cost estimates and the draft budget, including the staff establishment plan drawn up by the Director;

- approve the tendering procedures and the procedures for the award of contracts in accordance with the rules on the award of contracts to be established by the Administrative Board, which may not influence the execution of decisions to be taken by the Executive Committee;

- perform tasks entrusted or delegated to it by the Administrative Board.

3. Meetings, rules of procedure of the Executive Committee

The Executive Committee shall meet at least once a month. The meetings shall normally take place at the seat of the Joint Undertaking. The Director shall attend its meetings.

Subject to the approval of the Administrative Board, the Executive Committee shall draw up its rules of procedure.

Article 10

1. The Director shall be the chief executive responsible for the day-to-day management of the Joint Undertaking and its legal representative. He shall be nominated by the Administrative Board on a proposal by the European Commission.

2. He shall direct the execution of the programme within guidelines established by the Administrative Board to which he shall be responsible, and he shall supply the Administrative Board, the Executive Committee, the Advisory Committee and all the other subsidiary bodies with all information necessary for the performance of their functions.

3. The Director shall in particular:

- organise, direct and supervise the staff of the Joint Undertaking;

- submit to the Administrative Board his proposals concerning the organisation chart;

- draw up and regularly update the programme development plan and the programme cost estimates, in accordance with the financial regulations, and submit them to the Administrative Board;

- draw up, in accordance with the financial regulations, the draft annual budget, including the staff establishment plan, and submit them to the Administrative Board;

- ensure that the obligations with regard to the European Commission pursuant to the contract concluded between the latter and the Joint Undertaking are met, and in particular its provisions allowing representatives of the European Commission to carry out effective controls and, in the event of the detection of irregularities, impose dissuasive and proportionate penalties.

- submit the annual accounts and balance-sheet to the Administrative Board;

- submit to the Administrative Board any proposal involving a significant change in the design of the programme;

- be responsible for safety and take all the measures needed to meet safety requirements;

- draw up the annual report on the current status of the programme and its financial situation, and such other reports as may be requested by the Administrative Board, and submit them to the latter.

Article 11

1. The staff complement shall be determined in the establishment plan set out in the annual budget.

2. The members of the staff of the Joint Undertaking shall have a fixed-term contract based on the conditions of employment of other servants of the European Communities.

3. All staff costs shall be borne by the Joint Undertaking.

4. The Administrative Board, acting in agreement with the Commission, shall adopt the necessary implementing arrangements.

Article 12

All the revenue of the Joint Undertaking shall be applied to promoting the objective defined in Article 2. Subject to Article 20(2), no payment by way of division of any excess revenue over expenditure shall be paid to the members of the Joint Undertaking.

Article 13

1. The financial year shall correspond to the calendar year.

2. Before 31 March of each year, the Director shall transmit to the members the programme cost estimates as approved by the Administrative Board. The programme cost estimates shall include a forecast of annual expenditure for the following two years. Within this forecast, the estimates of revenue and expenditure for the first of those two financial years (preliminary draft budget) shall be drawn up in such detail as is necessary for the internal budgetary procedure of each member regarding its financial contributions to the Joint Undertaking. The Director shall supply the members with all supplementary information needed for this purpose.

3. The members shall forthwith communicate to the Director their comments on the programme cost estimates, and in particular on the estimates of revenue and expenditure for the following year.

4. Based on the approved programme cost estimates, and taking into account the comments received from members, the Director shall prepare the draft budget for the following year and shall submit it to the Administrative Board for adoption, by a majority of 75 % of the votes, before 30 September.

Article 14

1. The purpose of the financial regulations is to ensure the sound and economic financial management of the Joint Undertaking.

2. In particular, they shall include the principal rules on:

- the presentation and structure of the programme cost estimates and the annual budget;

- the implementation of the annual budget and internal financial control;

- the method of payment of contributions by the members of the Joint Undertaking;

- the keeping and presentation of accounts and inventory records as well as the drawing up and presentation of the annual balance-sheet;

- the procedure regarding calls for tender, based on non-discrimination between the countries of the members of the Joint Undertaking and the Community character of the project, the placing and the terms and conditions of contracts and orders on behalf of the Joint Undertaking.

3. The financial regulations shall be adopted by the Administrative Board by a mjority of 75% of the votes.

4. The detailed implementing rules enabling the Commission to ensure complance with its obligations pursuant to Article 274 of the Treaty establishing the European Community shall be set out in an agreement between the Joint Undertaking and the Commission.

Article 15

Within two months of the end of each financial year, the Director shall submit the annual accounts and balance-sheets for the preceding year to the Court of Auditors of the European Communities. The audit executed by the Court of Auditors shall be based on records and performed on the spot. The Director shall present the annual accounts and balance-sheet, together with the report of the Court of Auditors, to the Administrative Board for approval by a majority of 75% of the votes. The Director is entitled and, if requested by the Administrative Board, obliged to comment on the report. The Court of Auditors shall send its report to the members of the Joint Undertaking.

Article 16

1. The programme development plan shall specify the plan for the execution of all elements of the programme. It shall cover the whole term of the Joint Undertaking and be updated regularly.

2. The annual report shall show the current status of the programme, in particular with regard to the timetable, costs and performance of the programme.

Article 17

1. The Joint Undertaking shall be solely responsible for meeting its obligations.

2. The contractual liability of the Joint Undertaking shall be governed by the relevant contractual provisions and by the law applicable to the contract in question.

3. In the case of non-contractual liability, the Joint Undertaking shall make good any damage caused by it to such extent as the Joint Undertaking is subject to legal liability under the relevant national law.

4. Any payment by the Joint Undertaking for covering the liability referred to in Articles 17(2) and 17(3) and the costs and expenses incurred in connection therewith shall be considered as expenditure of the Joint Undertaking within the meaning of Article 12.

5. The Director shall propose to the Administrative Board any necessary insurance, and the Joint Undertaking shall take out such insurance as the Administrative Board may direct.

Article 18

1. The Joint Undertaking is open for accession by members other than those referred to in the second subparagraph of Article 1(4).

2. Any request for accession shall be addressed to the Director, who shall transmit it to the Administrative Board. The Administrative Board shall decide whether the Joint Undertaking shall start negotiations with the applicant on the conditions of accession. In the case of a positive decision, the Joint Undertaking shall negotiate the conditions of accession and submit them to the Administrative Board which shall act by a majority of 75% of the votes expressed.

3. Membership of the Joint Undertaking may not be transferred to a third party unless the prior and unanimous agreement of the Administrative Board is given. Any unauthorised transfer shall entail the immediate termination of membership of the Joint Undertaking and liability for any damage caused to the Joint Undertaking.

Article 19

1. The Joint Undertaking shall be established for a period of four years as from the publication of these Statutes in the Official Journal of the European Communities.

2. According to the progress in achieving the object of the Joint Undertaking, as defined in Article 2, that period may be extended by amending the Statutes in accordance with the provisions of Article 22. That period shall, in any event, be extended until such time as the obligations arising from the agreement referred to in Article 3 are met.

Article 20

For the purpose of conducting the proceedings involved in winding up the Joint Undertaking, the Administrative Board shall appoint one or more liquidators, who shall comply with the decisions of by the Administrative Board taken by majority of 75% of the votes.

Article 21

In any matter not covered by these Statutes, the law of the State where the seat of the Joint Undertaking is located shall apply.

Article 22

1. Any member of the Joint Undertaking may submit proposals for the amendment of these Statutes to the Administrative Board.

2. If the Administrative Board agrees to those proposals by majority of 75% of the votes, the Commission shall make a proposal to the Council for their approval in accordance with the procedure provided for in the first paragraph of Article 172 of the Treaty establishing the European Community.

LEGISLATIVE FINANCIAL STATEMENT

Policy area(s): ENERGY AND TRANSPORT

Activity(ies):GALILEO programme development and validation phase

Title of action: Proposal for a Council Regulation on the establishment of the GALILEO Joint Undertaking

1. BUDGET LINE(S) + HEADING(S)

The capital of the Joint Undertaking will consist of assets brought in by its members.

The capital brought into the Joint Undertaking will be subscribed by the founding members when it is set up or by a new member when it joins. The Administrative Board will decide upon the amounts of capital to be released each year. Assets in kind can be brought in. They will have to be the subject of an independent evaluation of their value and their utility for carrying out the activities of the Joint Undertaking.

It should be noted that all the budgetary data given below already appear in the financial statement annexed to the Commission's communication on GALLILEO of 22 November 2000 (COM(2000)750 final).

The European Community's contribution should come from two budget lines:

B5 -700 Transport Networks: EUR550 million

B6 - 6 Research and Technological Development: 6th Framework Programme (2002-2006): pm

In EUR million (current prices)

>TABLE POSITION>

The annual breakdown of financing is provisional, and will depend on both the phasing of the project and the availability of funding

The programme declaration relating to GALILEO could mandate the European Space Agency to transfer a contribution to the Joint Undertaking.

2. OVERALL FIGURES

2.1 Total allocation for action: Estimated cost of the development and validation phase: EUR1.1 billion

According to the financial estimates, the cost of the development and validation phase (2001 - 2005) will be approximately EUR1.1 billion. This amount will be entirely covered by public funds (Community budget (EUR550 million) and the European Space Agency (EUR550 million)).

The following indicative sources of financing at European level have been identified for the period 2001-2005 only:

Sources of financing for fixed costs // in EURmillion

// Validation and development phase

European Space Agency // 550 [13]

[13] Of which EUR50 million subscribed to capital of the Joint Undertaking and EUR500 million administered directly by the European Space Agency.

of which: TEN-Transport

Future research activities

// 550 +6th Framework Programme for RTD

550

pm [14]

[14] The references to future research activities in no way prejudge the political decisions of the Council and the European Parliament with regard to the priorities for these activities, their resources and their management.

TOTAL // 1100 + pm

2.2 Period of application:

2002-2005

2.3. Overall multiannual estimate of expenditure

a) Schedule of commitment appropriations/payment appropriations (see point 5.2)

b) Technical and administrative assistance and support expenditure

This type of expenditure does not apply in this field.

c) Overall financial impact of human resources and other administrative expenditure

All the (administrative/operational) expenditure will be covered by the budget of the Joint Undertaking.

2.4 Compatibility with the financial programming and the financial perspective

Proposal compatible with the existing financial programming and the current financial perspective

2.5 Financial impact on revenue

No financial implications (involves technical aspects regarding implementation of a measure)

3. BUDGET CHARACTERISTICS

>TABLE POSITION>

4. LEGAL BASIS

Article 171 of the EC Treaty

5. DESCRIPTION AND GROUNDS

5.1 Need for Community intervention

5.1.1 Objectives pursued

5.1 General objective of action

The object of the Joint Undertaking is to set up a satellite radionavigation system for the development and validation phase.

The three main tasks of the Joint Undertaking are as follows:

1. overseeing the implementation of the development phase and preparing for the deployment phase;

2. through the European Space Agency, launching the research and development activities [15] needed to successfully complete the phase for the development and coordination of national activities in this area;, launching a first series of satellites to finalise the technological developments that have occurred and ensuring the large-scale demonstration of the capabilities and reliability of the system;

[15] However, certain activities will remain the responsibility of the Joint Undertaking, in particular technical support for the standardisation and certification process and support for the international negotiations to be conducted by the European Community.

3. mobilising the public and private sector funds needed and setting up the management structures for the various successive phases of the programme

5.1.2 Measures taken following ex ante evaluation

Given the growing complexity of the development phase (2001-2005) and the sums of money involved (approximately EUR1.1 billion), a single management structure should be established to continue the programme, bring together the public and private sector funding needed, and prepare for the management of the deployment and operational phases of the programme, including its transformation into another legal structure which could take the form of a European company. During the development phase the European Space Agency [16] will have special responsibility for implementing this phase as regards research and development for the space segment and the earth segment associated with the system.

[16] In accordance with the Research Council Resolution of November 2000 which assigned the European Space Agency an implementing role.

This was confirmed by the Stockholm European Council (23 and 24 March 2001) which "invited the Council to define the arrangements necessary for launching the next phase of the project, including establishing a single and efficient management structure before the end of 2001, be it a Joint Undertaking under Article 171 of the Treaty, an agency, or another suitable body".

The Stockholm European Council also noted that "the private sector is ready to supplement the public budgets for the development phase". The representatives of the main industries concerned signed a Memorandum of Understanding in March 2001 whereby they committed themselves to indicating their contribution to the total amount of EUR200 million for the development phase of GALILEO by subscribing to the capital of the Joint Undertaking or contributing in some other form, e.g. by concluding a contract.

To this end, the Commission is proposing the establishment of a Joint Undertaking on the basis of Article 171 of the Treaty establishing the European Community.

The aim is to mobilise in one and the same legal entity all the funds assigned to the programme which, as things stand at present, essentially concerns the European Community and the European Space Agency. For this purpose, it is necessary, with a public-private partnership in mind, to have a flexible structure with legal personality that is capable of concluding the contracts needed to establish a European satellite radionavigation system, and step up the necessary research and technological development efforts.

However, the structure will not have regulatory powers in the field of satellite radionavigation. These will be exercised by the Commission, the Council and even Parliament in accordance with their respective responsibilities.

Several solutions were engaged, including the creation of a Community agency, which was not agreed on for the following reasons:

- The necessary legal basis (Articles 154 or 308 of the Treaty establishing the European Community) entails decision-taking procedures (co-decision or unanimity in the Council), incompatible with the deadlines set (end of 2001), in particular by the Stockholm European Council, for the establishment of a single management structure.

- It would have been impossible to allow the participation of the private sector in an agency, in particular because the latter does not have capital capable of receiving assets brought in by the private sector, except if, alongside the agency, a fund were to be set up bringing together the public and private funds assigned to GALILEO.

Since GALILEO comprises a major research and development component, based on the 4th and 5th R&D framework programmes and the trans-European transport networks, and, additionally, this programme will make it possible to make considerable progress in the development of satellite navigation technologies, there are clear grounds for having recourse to Article 171 of the Treaty establishing the European Community in order to establish a Joint Undertaking for the duration of the programme development phase which should be completed by the end of 2005.

5.1.3 Measures taken following ex post evaluation

Not applicable

5.2 Actions envisaged and means of budget intervention

The Joint Undertaking will require a degree of legal and financial autonomy in order to be able to contract and carry out all the legal operations involved in achieving its object.

The beneficiary is the GALILEO programme, with all the underlying factors. In this context, the population likely to benefit from this structure is the population of the Member States of the EU and the ESA, the population of other third States, and private businesses which have subscribed to the capital of the Joint Undertaking

Pursuant to Article 2 of the draft Statutes of the Joint Undertaking, its objective is to set up a satellite radionavigation system.

In this context, Article 3 of the Statutes specifies that the Joint Undertaking will entrust, by agreement, to the European Space Agency the carrying-out of activities needed during the development phase with regard to the space segment and the associated earth segment. The Joint Undertaking will make the necessary funds available to the European Space Agency which will administer them in accordance with procedures to be set out in the agreement. Provision is also made for the Joint Undertaking to reserve the right to adjust the agreement in the light of developments occurring during the development phase. The agreement will also cover activities launched by the European Space Agency financed from funds not assigned to the Joint Undertaking.

As regards the preparation of the deployment phase and the conditions relating to the financial participation of the private sector, the Joint Undertaking may, following an invitation to tender, conclude a contract for the provision of services with private undertakings or a consortium of private undertakings

Budget intervention by the European Community and the other members of the Joint Undertaking will take the form of capital brought in.

5.3 Means of implementation

The Joint Undertaking will be administered by three bodies which will draw up the rules of procedure and the financial regulations and issue directives:

I.- The Administrative Board (which may, where appropriate, consult an Advisory Committee)

The Administrative Board will be made up of the members of the Joint Undertaking (Article 8).

The Administrative Board is the body which will take all the strategic decisions on programming, financial and budgetary matters. In addition, it will appoint the Director of the Joint Undertaking and approve its organisation chart.

II.- The Executive Committee

The Executive Committee will consist of three members: a representative of the European Commission, a representative of the European Space Agency, and a representative designated by the Administrative Board.

Article 9(2) of the Statutes of the Joint Undertaking describes the functions of the Executive Committee to which the Administrative Board may entrust or delegate tasks that it considers necessary in order to allow more flexible management of the Joint Undertaking. It goes without saying that the Executive Committee will work in close coordination with the Director who will attend its meetings. These meetings will be held at least twice a month.

III.- The Director

The Director, who will be designated the Administrative Board, will be the legal representative of Joint Undertaking and will ensure its day-to-day management under the direct supervision of the Executive Committee. He will direct the staff of the Joint Undertaking in accordance with directives issued by the Administrative Board. He will draw up for the latter the various documents and reports provided for in the Statutes (organisation chart, development plan, budget, balance-sheet, annual report and any other document judged necessary).

As regards the staff of the Joint Undertaking, the Director will be designated by the Administrative Board while the other members will be designated on the basis of procedures to be established by the Administrative Board. Members of staff will be recruited by the Director on a fixed-term contract based the conditions of employment of other servants of the European Communities.

The financial management of the Joint Undertaking will be based on its financial regulations (adopted by the Administrative Board) which will include rules on:

- the presentation and structure of the programme cost estimates and the annual budget;

- the implementation of the annual budget and internal financial control;

- the method of payment of contributions by the members of the Joint Undertaking;

- the keeping and presentation of accounts and inventory records as well as the drawing up and presentation of the annual balance-sheet;

- the procedure regarding calls for tender, based on non-discrimination between the countries of the members of the Joint Undertaking, the placing and the terms and conditions of contracts and orders on behalf of the Joint Undertaking.

As regards the placing of contracts, the financial regulations will provide for the selection of the tenders giving the economically and technically most efficient solution. The Director, in collaboration with the Executive Committee, shall strive to achieve as wide a distribution of contracts as possible, taking into account the Community nature of the programme.

6. FINANCIAL IMPACT

All the (administrative and operational) expenditure will be covered by the budget of the Joint Undertaking.

7. IMPACT ON STAFF AND ADMINISTRATIVE EXPENDITURE

The Community's contribution to the budget of the Joint Undertaking is global and comes under the intervention expenditure of the Community budget. For its part, the budget of the Joint Undertaking will cover the Joint Undertaking's costs, including all its staff costs.

8. FOLLOW-UP AND EVALUATION

8.1 Follow-up arrangements

Once it has been set up, the Joint Undertaking will be monitored in accordance with its Statutes.

8.2 Arrangements and schedule for the planned evaluation

The Joint Undertaking will be evaluated on the basis of an annual report adopted by the Administrative Board describing the status of the project, in particular as regards the timetable, costs and implementation of the programme. Where its operation is concerned, the Statutes specify that the Director for the programme is to submit the annual accounts and balance-sheet for the preceding year to the Court of Auditors of the European Communities and present the annual accounts and balance-sheet, together with the report of the Court of Auditors, to the Administrative Board for approval.

9. Audit measures

Specific control measures are provided for:

9.1 As regards the Joint Undertaking

The Director will implement the budget of the Joint Undertaking. Within two months of the end of each financial year, the Director wall submit the annual accounts and balance-sheets for the preceding year to the Court of Auditors of the European Communities. The audit executed by the Court of Auditors will be based on records and performed on the spot. The Director will present the annual accounts and balance-sheet, together with the report of the Court of Auditors, to the Administrative Board for approval. The Court of Auditors will send its report to the members of the Joint Undertaking.

The Administrative Board will adopt the financial regulations of the Joint Undertaking. The Statutes specify that the purpose of the financial regulations is to ensure the sound and economic financial management of the Joint Undertaking. In particular, they will include the principal rules on:

- the presentation and structure of the programme cost estimates and the annual budget;

- the implementation of the annual budget and internal financial control;

- the method of payment of contributions by the members of the Joint Undertaking;

- the keeping and presentation of accounts and inventory records as well as the drawing up and presentation of the annual balance-sheet;

- the procedure regarding calls for tender, based on non-discrimination between the countries of the members of the Joint Undertaking, the placing and the terms and conditions of contracts and orders on behalf of the Joint Undertaking..

As regards the placing of contracts, the financial regulations will provide for the selection of the tenders giving the economically and technically most efficient solution.

9.2 As regards the Court of Auditors

The Court of Auditors will examine the accounts of the Joint Undertaking and will publish an annual report on the budgetary activities of the Joint Undertaking.

9.3 As regards the Commission

The Joint Undertaking will perform the tasks entrusted to it in such a way as to ensure that the financial interests of the Community are protected. It will allow the Commission to carry out effective controls and, in the event of the detection of irregularities, impose dissuasive and proportionate penalties.

The controls will be carried out and the penalties imposed by the Commission in accordance with Regulations (Euratom, EC) 2988/95, (Euratom, EC) 2186/96, (EC) 1073/99 and (Euratom) 1074/99). Recovery orders by the Commission will be considered to be directly enforceable decisions pursuant to Article 256 of the Treaty establishing the European Community.

The Joint Undertaking's contractors (Articles 3 and 4) may also be subjected to controls by the Commission.

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