EU INSTITUTIONS AGREE ON GALILEO GOVERNANCE; FINAL

UNCLAS SECTION 01 OF 05 BRUSSELS 000651

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E.O. 12958: N/A
TAGS: ECON EIND EU EUN TSPA TSPL
SUBJECT: EU INSTITUTIONS AGREE ON GALILEO GOVERNANCE; FINAL
POLITICAL HURDLE PASSED-RESPONSE TO C-WP7-02359


1. (SBU) Summary: On April 22, the European Parliament
endorsed a compromise text on the governance and financing of
the EU's Galileo global satellite navigation system (GNSS).
The adoption of the Regulation, which already received the
backing of the EU member states at the Transport,
Telecommunications and Energy Council of April 7, has removed
the last political obstacle to the deployment of Galileo.
The EU's GNSS will be jointly managed by the European
Commission, the European GNSS Supervisory Authority (GSA) and
the European Space Agency (ESA). Its deployment phase is
scheduled to run until 2013, at which time, the true
exploitation of the system is expected to commence. The
first invitations to tender for the establishment of
Galileo's infrastructure (including satellites and ground
infrastructure) are expected to be issued by summer, followed
by a review of bids and contract awards in December. The
compromise text provides guidance on:
-- Overall governance of the program, defining tasks
for the Commission, GSA, and ESA;
-- Future structure of the GSA, which will include a
reduction in staff to be moved to the Commission;
-- Creation of the Galileo Inter-institutional Panel
(GIP) with representatives from the Council, Parliament, and
Commission to perform joint oversight of the program; and
-- Procurement rules, defining the six main work
packages and requirements for subcontractors. End Summary.

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Definition of Galileo Services
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2. (SBU) Galileo, Europe's attempt to build a competitor to
the U.S. Global Positioning System (GPS) is designed to
deliver five separate signals aimed at different user groups.
The Commission is expected to charge user fees for several
of the signals, a key difference from GPS, which provides
free access to all users.
-- The open service will be free to all users and is
intended for high-volume satellite navigation applications,
such as personal and automotive satellite navigation devices.
Resulting from an agreement in July, 2007 between the U.S.
and the EU under the auspices of the GPS-Galileo Agreement,
the open service will be fully interoperable with the open
signal on the next generation GPS satellites.
-- The commercial service, which is expected to carry a
usage fee, is to be used for commercial applications where
improved performance over the open service is required.
-- The safety of life service is aimed at safety
critical users, for example trains, maritime, and aircraft,
for which stringent performance levels and guarantees of
signal integrity are required.
-- The public regulated service (PRS),using strong
encrypted signals and restricted to government authorized
users, is intended for sensitive applications. It is
expected that this signal will be used in security and
military operations. A Commission Communication is expected
to be released detailing the specifics of PRS later this
summer. (Comment: Though this likely is the signal to be
used for military operations, the Commission stands by its
commitment to develop a system for civil users. As of now,
there does not appear to be any direct inclusion of military
requirements into the design, and that it will be up to
individual Member States to develop Galileo applications for
their militaries. This could change in the future as the EU
looks for more control of security and military roles in
Europe. Please see the Brussels cable to be released shortly
on European Parliament recommendations for the use of space
assets in the European Security and Defense Policy. End
comment.)
-- The search and rescue service, part of the
international SAR satellite system (COSPAS-SARSAT) is
designed to detect emergency signals transmitted by beacons
and providing location data to rescue personnel.

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General Framework for Governance
--------------


3. (U) The public governance for Galileo will be performed,

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under a strict division of responsibilities, by the EU,
represented by the Commission; the European GNSS Supervisory
Authority (GSA); and the European Space Agency (ESA). The
Commission is responsible for overall management, which
includes financial and technical audits, risk management, and
milestones for implementation of the program. Additionally,
the Commission is responsible for all questions related to
the security of the systems, including oversight and
integration of security requirements in the overall program.
GSA will work under the supervision of the Commission, in a
reduced form from its current organization. ESA will,
according to an agreement to be conducted in the coming
months with the Commission, have responsibility for the
management of procurement, specifically the implementation of
the deployment phase, delivery of procurement tenders, and
completion of contracts with the private sector.

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GNSS Supervisory Authority
--------------


4. (U) Under the provisions of the agreement, GSA will
continue to exist and act under the supervision of the
Commission. GSA was originally created to act as the
oversight body between the European Community and industry
during the existence of the public-private partnership.
However, since the EU took full control of the program, the
various institutions have debated whether or not GSA should
continue to exist as an entity, and if so, what should the
new functions entail. Under the agreement, GSA will be
responsible for:
-- Galileo security, to include the implementation of
security procedures and system security audits;
-- Preparation of the commercialization of Galileo, to
include market analysis; and
-- Other tasks entrusted to it by the Commission, which
could include promotion of Galileo applications and services


5. (SBU) Officials from DG Energy and Transport (TREN),the
Commission's home for the Galileo Unit, indicated to USEU
EconOff that GSA will be cut approximately in half over time.
As of now, GSA employs approximately 45 staff, but this
number will slowly be reduced to approximately 20 to handle
the above tasks. The other 25, primarily engineers and
technical staff, will be transitioned over to the Commission
under the Galileo unit to handle implementation of the
program. As of now, there are several GSA employees sitting
in Commission spaces and performing Commission functions
without having been officially transferred. The transfer of
GSA employees and the expected hiring of several new staff
likely will mean that within DG TREN, the Galileo unit will
be elevated to the rank of a Directorate with a single
Director responsible only for Galileo.

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Galileo Inter-institutional Panel
--------------


6. (SBU) As part of the process, the European Parliament in
particular has demanded more control and oversight of the
Galileo program. However, many in the Commission and the
Council have been very wary of providing too much control to
Parliamentarians, most of whom have little technical
expertise, and as such, oversight of all technical details
could substantially slow the process or lead to irrational
decisions. The compromise that was reached was the formation
of the Galileo Inter-institutional Panel (GIP). The
Commission is required to take into account the views
expressed by the GIP, though it is not clear how much
authority the GIP will have over Commission decisions. Three
Council member, likely to be Member State Transport
Ministers; three Parliamentarians; and one Commission member
will make up the seven person oversight panel. Though it has
not yet been decided who will serve on the GIP, DG TREN
representatives have ensured USEU EconOff that the U.S. will
be notified as soon as possible, to allow for the possibility
of meetings with senior U.S. GPS officials. The role of the
GIP is to meet up to four times a year to follow closely:
-- Progress on the implementation of GNSS programs, in

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particular with regard to implementation of procurement and
contract agreements;
-- International agreements with third countries;
-- Preparation of satellite navigation markets;
-- Effectiveness of governance arrangements; and
-- Annual review of the work program.

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Export Control of Galileo Components
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7. (SBU) With control of the overall program, the Commission
is looking for ways to exert its influence over export
control aspects of the Galileo technological development.
Several Commission members have indicated they still are
frustrated by the sale of rubidium clocks from Swiss company
Temex to China. The Commission has competence of the
management of dual-use regulations, most of which are
structured exactly after those of Wassenaar, and which are
then binding to the member states. As many of the components
of Galileo could be considered dual-use, these could fall
under existing regulations. However, since DG TREN is
concerned that this has very little actual strength, it is
taking two further steps:
-- During the current revision of the EU's export control
process, the Galileo program is working to add
Galileo-specific items. Additionally, the EU is making
strides to develop coherency among the Member States,
processes so that consistent rules are applied across Europe.
In the process, using sanctions-based inspiration, the EU is
developing lists of countries which there are substantial
restrictions to export. DG TREN hopes to ensure that China
is included in these lists, providing an impediment to
technology transfer.
-- During the Galileo contract process, the Commission
intends to enter language into the contracts to place strict
requirements on the companies related to the sale of
components developed specifically for the Galileo program.


8. (SBU) A DG TREN representative indicated to USEU EconOff
that the Commission is already speaking with Switzerland and
Norway, members of ESA but not of the EU, to make clear what
rules will be applied to their companies during the
contracting process. The goal is to ensure that technology
is not transferred outside of Europe, specifically to China,
that could place Europe at a disadvantage in GNSS development.

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Galileo Procurement
--------------


9. (U) According to the agreement, Galileo procurement will
be applied according to the EU's public procurement rules,
which give equal opportunity to all bidders, as well as
opportunities for third country involvement. Specifically in
the case of Galileo, the following rules will be applied:
-- Infrastructure will be split into six main work
packages--system engineering support, ground mission
infrastructure completion, ground control infrastructure
completion, satellites, launchers, and operations; as well as
a number of additional work packages;
-- Competitive tendering of all packages, and in the case of
the six main packages, one bidder may bid for the role of
prime contractor for a maximum of two of the six main work
packages. Note that only European companies can bid for the
role of prime contractor on the six main work packages;
-- Satisfy the EU's requirement for small and medium
enterprise (SME) involvement; least 40% of the activities to
be subcontracted must be performed by companies which are not
prime contractors of any of the six main work packages; and
-- Use of dual sourcing wherever appropriate to avoid
long-term dependence on single suppliers.


10. (SBU) The time frame for contracting still is fluid, but
initial calls for tender could be released as early as the
first week of May to as late as the end of June. This will
take place in two phases, with the first phase calling for an
expression of interest from companies planning to bid on the
main work packages, and the second to take place in the early

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fall, the official call for proposals. These calls are
expected to close shortly thereafter, with decisions made in
December, 2008. (Comment: At least one DG-TREN
representative is pessimistic that any major decisions will
be made this year, and that he expects the time table to slip
into early 2009. End comment.)


11. (SBU) The procurement rules, combined with Commission
intentions, provide several opportunities for U.S. companies
to be involved in the process. The SME requirement does not
specifically call for the involvement of small and medium
enterprises, only that companies which have not been named
prime contractor for one of the six main work areas be
involved in the subcontracting responsibilities. As only the
prime contractor roles, as well as those that have a security
component, are limited to European companies, third country
companies can become part of consortia in the bidding
process. This allows for large U.S. companies to act as
subcontractors and count in favor of the 40% threshold, a
possible benefit to European bidders during the tendering
process.


12. (SBU) Under a specific heading, that of launchers, DG
TREN representatives have indicated an interest in using U.S.
launch vehicles to fulfill some of the satellite launches.
This is primarily security related. According to DG TREN,
given the existing U.S.-EU Security Agreement, there are no
security barriers to allowing Galileo satellites to be
launched from U.S. soil. This does appear to be a concern in
the cases of Russia and China, where Europe would be required
to give up control of the satellite for a period of time, and
given the sensitive nature of some of the components, this is
not a favorable scenario.

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Third Country Relationships
--------------


13. (SBU) With the new governance structure, the relationship
with third countries has the potential to change. As Galileo
becomes more of a reality, it is clear from discussions with
Commission representatives how important is has become to
Europe to deploy a full constellation, particularly ahead of
China's Compass system, but possibly also before Russia fully
replenishes its own Glonass system. Europe is very concerned
that if it falls to fourth in the race to deploy a full GNSS
constellation, it will lose some of the strategic and
economic benefits it hopes to gain. To that end, DG TREN
officials have explained that the relationship with China is
quickly changing, as Europe now views China as a competitor.
However, as contracts still exist between GSA and China,
there will still be some level of cooperation, most notably
in the form of Galileo applications using the open signal,
but neither in the development of the satellites themselves
nor in the use of encrypted signals. China will also not be
permitted to have engineers co-located in GSA offices.
(Note: Israel's role, from its involvement in the Growing
Galileo conference held last fall, appears to be similar to
China's in the development of applications to Galileo open
signals. End note.) As mentioned earlier, the Commission is
very concerned that any technology transfer, such as the
Temex clocks sold to China, will enable China to make strides
in its own system, possibly to the detriment of Galileo in
the long-term. (Comment: Temex has explained to the
Commission that the clocks it sold to China were of a
"degraded quality," but there has been no explanation of what
that means. The Commission is not convinced that the clocks
are anything but very close to full quality. End comment.)


14. (SBU) Now that the negotiations among the EU institutions
have been completed, the Commission is prepared to continue
cooperative efforts with the U.S. Most notably, the EU is
most interested in discussions pertaining to the GPS-Galileo
Cooperation Agreement, up for review in 2008. In response to
questions about the ratification of the agreement by the
individual Member States, DG TREN explained that the Council
posed a question in March to each Member State asking if the
EU can enforce provisional application of the agreement, even
though the Netherlands, Belgium, the UK, Ireland, and Cyprus

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have not formally ratified. The Commission has not yet
received a response, but should provide a written response to
the U.S. when all member capitols have responded.

MURRAY
.