A European satellite project unexpectedly finds itself at the uncomfortable end of the divorce wrangles  between  Britain and the EU. It illustrates the  direct and tangible  consequences of the government’s solid red lines, which put contracts and industry growth at  risk.  What is really at stake?  This article draws on evidence given by the space industry to the  House of Lords Select Committee on the European Union, and examines the Co-operation Agreements of Norway and Switzerland on Satellite Navigation Programmes. It views them through the prism of  the draft UK-EU  Withdrawal Agreement.

*Update 24 April 2018 - the Financial Times is now reporting an 'escalating row' between London and Brussels over Galileo.*

One of the first tangible effects of  leaving the European Union is that Britain will need a new, bi-lateral treaty on satellite navigation systems as well as a security treaty with the European Union,  in order to retain its place in the prestigious Galileo satellite programme after March 2019. Even then, Britain  may end up with only observer status, and limited benefits, depending on how the agreements are established, and there is likely to be a gap in time before such an agreement could be concluded. This is a consequence of Britain’s exit from the EU on a sector that is vital to both innovation and security.

Galileo will be be a constellation of 24  satellites and 6 spares. When completed in 2020, it will provide an alternative navigation system to GPS. It will come with a higher specification that will feed into innovative new technologies, including autonomous cars.  Its strategic importance relates to an encrypted system known as the Public Regulated Service (PRS)  which provides secure   signals that cannot be jammed. The PRS is intended for military and law enforcement users, including  customs and border forces, as well as the  emergency services, and search and rescue.   

Britain has contributed to Galileo  since the programme  began in 2002,  It provides a foundation stone for a British  industrial policy goal to get 10 per cent of the global space market by 2030,  (the Space Innovation and Growth Strategy 2014-2030  Space Growth Action Plan.)  The UK Space Agency was created in 2010 to promote space-related innovation and development in line with that policy goal (Space News 9 November 2017 )

Post-Brexit, Britain is unlikely to be able to retain the same participatory status in Galileo  that it currently enjoys. (Ground control to Mrs May – have we lost the signal? )The possibility that Britain’s participation could be jeopardised by Brexit (Oral Evidence-Brexit:Space p3)  is a cause for consternation and concern, due to the  crucial nature of the Galileo system for both civil and military communications.   For example, Airbus  has said that British participation in Galileo is critical to any future partnership on security and defence, (as reported by the Financial Times.)

The government is therefore wanting to get a post-Brexit  deal that could keep Britain in the programme after March 2019 when Britain is due to leave officially. Theoretically, the options for Britain could be to follow the example of either Norway or Switzerland.  However, we will struggle to keep the same level of privileged access that is currently enjoyed.   

If Britain follows Norway, it could get full access to the Galileo project, with an open door to negotiate  access to a military-grade encrypted system, but that would mean that Britain would have to go the higher level route of EEA membership. It would also need a security treaty. If Britain follows the Swiss model, it would  be able to manufacture and sell certain technologies to the Galileo programme, but would only have observer status. That would still be subject to a security treaty, and the route to accessing the encrypted system would be subject to a separate request.

The future of British involvement in the Galileo satellite programme encapsulates the wider dilemma over how to maintain essential business and regulatory frameworks post-Brexit. The problem flows from provisions in the Transition deal agreed  last month as part of the overall UK-EU Withdrawal Agreement, which appear to have been agreed, unchallenged, by the government.

Galileo is operated by the GNSS Agency, which is an EU agency, overseen by DG Growth.  Britain will be automatically excluded  as a consequence of the UK-EU Withdrawal Agreement (Article 123) which shuts us out from participation in EU ‘institutions, bodies and agencies’ one year from now.  We will   specifically excluded from any decision-making processes.  The Withdrawal Agreement additionally precludes Britain from having access to  any information that relates to security of the EU. ( See EU Withdrawal Agreement: a deep and special loss of influence )

 According to a report in the Financial Times, the European Commission has written to the  Home Office saying that  Britain  cannot be told about long term plans for the Galileo system after 2019.  The reason given was that ‘Britain would become a third country’ and as such, would need  a security agreement in order to be able to exchange sensitive data. The Financial Times also reported that Defence Secretary, Gavin Williamson, ‘hit the roof’ on being told this.

A close reading of the UK-EU Withdrawal Agreement (coloured version) Article 122.7(b) does indeed say that Britain will be excluded from the sharing of sensitive information where it relates to  programmes that will continue after 2019. It also says that the EU will notify the British government where this applies:

"where acts of the Union provide for the participation of Member States, nationals of Member States or natural or legal persons residing or established in a Member State in an information exchange, procedure or programme which continues to be implemented  or starts after the end of the transition period, and where such participation would grant access to security related sensitive information that only Member States (or nationals of Member States, or natural or legal persons residing or established in a Member State) are to have knowledge of, in such exceptional circumstances the references to Member States in such Union acts shall be understood as not including the United Kingdom. The Union shall notify the United Kingdom of the application of this derogation;"

It begs the question, how should a modern-day Sir Humphrey explain to his minister that his government  has been hoisted on its own petard?

The Prime Minister, Theresa May, wants to negotiate  some form  of post-Brexit  participation in the Galileo programme.  She spoke of it in her Munich speech on security, calling for the "right agreements for business". In her speech of 2 March on  Britain's future relationship with the EU, Mrs May spoke of wanting to explore terms with the EU to stay in ‘agencies critical for the  aerospace industries’.

The British government appears to be relying on the fact that both Norway and Switzerland, which are non-EU members, are able to participate in Galileo, and argues therefore that Britain will be able to participate too. However, this argument  ignores some key facts.

 Norway does indeed  participate in the European Global Navigation Satellite Services  (GNSS) Agency  which runs the Galileo probramme  for which it has agreed to contribute €70 million.     It hosts two ground stations for Galileo in Antarctica and  on  the island of Svalbard.

The legal basis of Norway’s participation in Galileo relies on the country’s  membership of the European Economic Area (EEA), and, in addition, on a security agreement  covering  “procedures for the exchange of classified information”.  This  is  enshrined in a  co-operation  agreement with the EU (Cooperation agreement on satellite navigation between the European Union and its member states and the Kingdom of Norway).

The agreement was negotiated following directives from the Council dating back to 2005. It was signed with the European Commission  on 22 September 2010, and  came into force provisionally following a Council of Ministers Decision on 14 February 2011, subject to ratification by Member States .

The objective of the Norway agreement is to “strengthen the cooperation between the Parties by complementing the provisions of the EEA Agreement applicable to satellite navigation.” It  does build in a PRS participation, but this will be subject to a second agreement. It is understood that Norway is still in the process of negotating a PRS agreement, almost eight years after the signing of the original agreement. (Oral Evidence – Brexit:space p16).

The Swiss agreement is done on a different basis from Norway’s, and gives fewer benefits.  Switzerland is not an EEA member, but it  does have a security agreement with EU (Agreement of 28 April 2008 between the Swiss Confederation and the European Union on the security procedures for the exchange of classified information) .  It signed a  Co-operation   Agreement  on GNSS (Co-operation agreement between the European Union [...]and the Swiss Confederation [...]on the European Satellite Navigation Programmes on 18 December 2013.

 This Agreement states that   Switzerland’s participation in the European  GNSS Agency  is subject to conditions laid down in a separate umbrella agreement for Swiss participation in EU Agencies.  The agreement is about industrial co-operation and reciprocal benefits. It seems that the EU wanted access to state-of-the-art hydrogen-maser clocks http://galileognss.eu/switzerland-joins-galileo/  that are made in Switzerland and used by the Galileo satellites. 

The Swiss only have observer rights on the GNSS Agency commitees, and have no voting rights.  Switzerland  had to agree to retrospectively pay in €80 million  for the period from 2008-2013, and it pays an ongoing fee based on GDP.   It  has the right to provide GNSS services, except for the PRS. Access to PRS would be subject to a separate agreement,  which the Swiss government would have to instigate.  Access to the PRS service is governed by a European  law adopted in 2011 (Decision No 1104/2011/EU Of The European Parliament And Of The Council of 25 October 2011 on the rules for access to the public regulated service provided by the global navigation satellite system established under the Galileo programme).

The EU is now  investing €12 billion  in its space programme from 2014-2020,  and some €3 billion is understood to have been spent on  Galileo contracts (Financial Times). Under the norm of ‘juste retour’ (Oral evidence: Brexit: Spacep3).  British companies would usually be entitled to contracts roughly equivalent in value to what Britain has invested in the programme.  Industry estimates suggest that Britain has paid in some 12 per cent of the annual budget  and received  back some 15 per cent of the  share of the work. (Financial Times )

The British space industry is currently worth around £14 billion, according to  Richard Peckham, chairman of UK SPace, giving evidence to  the House of Lords Select Committee on the European Union  Internal Market Sub-Committee on  15 March 2018  (Oral evidence: Brexit: Space p7 ).  Much of the British success success is  built on the back of the EU space programmes.  Industry representatives have pleaded with the government to keep us in Galileo.  The industry  told the Lords Select committee that they are being subjected to punitive Brexit-related clauses in contracts,   and that  timing is critical otherwise companies stand to lose out on upcoming tenders  (pp4,5,6,9). They  warned  Britain may never be able to fully re-establish its current position  (pp16-17).  For example, Airbus  told the Select Committee that it is ‘currently engaged in a tender for the ground control segment but “Due to the Brexit environment, the conditions of tender and the security constraints, we do not believe it is possible to sustain a lead from the UK for that activity. “   (p1)

Some British politicians hark back to the 1950s when this country gave up its own investment in a space programme.   This rather misses the point that times have changed.

Space is a long term business and the investment levels are such that only the large economic blocs can afford it.  If Britain wants to benefit from the space industry in 2030, it needs to be participating in the new projects that are being commissioned now. Brexit, however, seems to be getting in the way. The  timescales alone  - to negotiate a bespoke bilateral agreement,    would seem to narrow the chances of the government  delivering in time for the UK space industry  to capitalise on the 2018 rounds of  contracts. Moves are already being considered to take parts of the industry into the EU 27 to secure business.

However, the Galileo dilemma highlights a much wider issue for British industry. These tensions are likely to be replicated across many other sectors where business needs to participate in EU agencies for regulatory or research and development purposes. Pleading for bespoke  bi-lateral agreements is unlikely to resolve the situation – as the Norway and Switzerland examples above illustrate, either we will not have the correct foundations in place, or we will be left with  an inadequate status. And it could take years. Overall, British industry is likely to end up in a weaker position.  It suggests that a  recalibration of policy  is needed.

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24 April 2018 - the Financial Times reports an 'escalating row' between the UK government and the EU. The UK is reported to be threatening to block a vote on procurement for the next batch of satellites. this would be bad form  the EU norm is consensus. Apparently, the Department of Business wants to develop a cheaper option for the UK and get a refund from the EU for its entire Galileo contribution.

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For new Iptegrity  readers, I have been analysing EU policy for over 10 years ( see 10 years of Internet wars ), and have considerable experience of interpreting EU documents, including political compromises. I also have over 25 years' experience of the telecoms and technology sectors, and I have enormous respect for British satellite engineers who do an amazing job in enabling us to communicate via the ether.

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