Revisiting Offset Practices in European Defence Procurement: The European Defence Agency's Code of Conduct on Offsets

Abstract

Offsets - otherwise known as industrial compensations - constitute a common feature of defence markets around the world. In the context of the EU and the internal market they have been considered as an obstacle in the effort to create a truly open European Defence Equipment Market (EDEM). One of the main reasons why offset practices have been left largely untouched and unchallenged until recently is their perceived politically sensitive nature. The Code of Conduct on Offsets of the European Defence Agency (EDA) is the first attempt to address this industrial phenomenon at EU level. The purpose of the present article is to present and analyse this instrument and to attempt to place it in its wider regulatory context. The article argues that the EDA’s Code of Conduct on Offsets constitutes an important initiative. However like any other “soft law” initiative the degree of success depends greatly on the willingness of participants to exercise self-restraint and comply with their commitments.

Keywords: Offsets, industrial compensations, code of conduct, Article 346 TFEU, defence procurement, defence, defense, security interests, armaments, procurement regulation, European integration, competition, countertrade

JEL Classification: F52, F59, H56, H57, K12, K23, K49