Franco-Spanish Sub Dispute Shows Challenges Facing EU Defense Market
As if to illustrate the challenges facing an integrated European defense market, the French naval shipyard DCNS is suing Spain’s leading state-owned shipbuilding firm, Navantia, for allegedly stealing trade secrets relating to the Scorpène submarine project.
Franco-Spanish Sub Dispute Shows Challenges Facing EU Defense Market
Soeren Kern | World Politics Review | May 28, 2009
The two companies originally developed the Scorpène as part of a joint venture. But DCNS now accuses its Spanish partner of copying Scorpène technology and using it for the new S-80 submarine that Navantia is building both for the Spanish Navy as well as for export markets, where it will compete with the Scorpène.
Navantia says the dispute originated in July 2005, when the Spanish government selected Lockheed Martin, the American defense conglomerate, as the supplier of the combat management system for the next-generation S-80 submarine program. Spain had been under intense pressure to choose a European (read: French DCNS) system. The tensions escalated when Navantia fielded the S-80 in several submarine tenders, particularly the one recently floated by Turkey, in which DCNS was hoping to sell its Marlin class vessels. (Turkey ultimately awarded the $4 billion contract to the German shipyard HDW-MFI.) Then, in 2008, France sold Brazil four Scorpène submarines as part of a “strategic defense alliance” that excluded Navantia.
Despite the dispute, which could have far-reaching consequences for France and Spain in the international market for submarines, the Scorpène is the largest and most important defense-industrial product jointly produced by Spain and France. It has also been extremely profitable for both sides. Navantia and DCNS have sold a total of 14 Scorpène submarines worth billions of dollars to four countries: Brazil (4), Chile (2), India (6) and Malaysia (2).
It is no surprise, then, that Navantia and DCNS began talks in May in order to try to resolve the legal tussle. Navantia, which is worried about the potential effects that a lawsuit might have on its export sales, says the best option for both companies “is not to negotiate in the courts” and that it is “open to dialogue.” One option currently under consideration involves inviting DCNS to participate in the S-80 program if Navantia is included in the Scorpène deal with Brazil.
Of course, the Scorpène is not the only European defense cooperation venture that has run into trouble. Indeed, some projects have fared far worse. Europe’s biggest military project, the Airbus A400M military transport aircraft program, has degenerated into a veritable disaster. The A400M project was first launched in 1982 as the Future International Military Airlifter (FIMA) as a replacement for the American C-130 Hercules. But problems attributed to intense political wrangling over issues such as the engine choice for the new airlifter plagued the project from the start. After more than 20 years of delays, seven European countries in 2003 signed a €20 billion agreement to buy more than 200 A400M cargo planes, in what was then hailed as Europe’s most ambitious cross-border arms procurement project.
But today the A400M remains grounded, with its first test flight delayed indefinitely because the engines—which are being developed by an unwieldy consortium made up of manufacturers in France, Germany Spain and the United Kingdom—are not ready. Moreover, the plane is too heavy and cannot lift the 32 tons required to carry a modern armoured infantry fighting vehicle. The initial delivery date has now been delayed until 2013 or 2014, which has prompted the A400M’s biggest client, the German Air Force, to begin looking for potential alternatives. In March 2009, Airbus CEO Thomas Enders told Germany’s Der Spiegel that the A400M may need to be scrapped altogether.
Delays and cost overruns due to political power struggles have also plagued other European collaborative defense projects, including the Eurofighter combat jet, the Galileo satellite-based navigation system, and have even hindered the proper functioning of the European Defense Agency (EDA).
Detractors say the Eurofigher, which was designed for Cold War missions, was technologically obsolete by the time it finally became operational in 2003. The Galileo project is designed to be the European Union’s rival to the US Global Positioning System (GPS). Conceived in 1999, Galileo was originally scheduled to go into service in 2008, but in-fighting among the eight European companies involved in the construction consortium prompted the EU to take direct control of the project in 2007. It is now supposed to become fully operational by 2013, at a cost to European taxpayers of up to €10 billion.
For its part, the EDA was established in 2004 in order to improve European cooperation on armaments. The idea was to create a more integrated European defense market that would allow for greater economies of scale and increased industrial competition, leading to lower prices, especially for advanced equipment. In 2006, the EDA introduced a defense procurement “code of conduct” that was to ensure that defense companies from any EU country could compete for most defense contracts across Europe. But EU member states have shown very little enthusiasm for awarding contracts to outside suppliers. Of the 26 contracts that have been awarded via the EDA’s website, only two have been cross-border.
The EU did manage to move a step closer to creating a single European defense market during the French EU presidency in December 2008, when the European Parliament approved a proposal aimed at harmonizing disparate national licensing rules on defense exports that until now have been a major obstacle to closer integration. The new directive calls for a European system of licenses that will be uniform and applicable throughout the 27 member states. Nevertheless, the Treaty of Nice currently enables member states to exempt almost all defense and sensitive security procurement from internal market rules, meaning the EU is still a long way from a having a truly open defense market.
Although European integration continues apace on many fronts, pursuit of the “national interest” remains the Achilles’ heal of greater European defense cooperation. It also poses one of the greatest constraints to a greater European role in world affairs.
Soeren Kern is Senior Fellow for Transatlantic Relations at the Madrid-based Grupo de Estudios Estratégicos / Strategic Studies Group. Follow him on Facebook. Follow him on Twitter.
Originally published by World Politics Review on May 28, 2009.
