As one of the last bastions of purely national competence, trade in arms is excluded from the application of the Treaty rules. Article 346 TFEU provides that the Treaties do not preclude Member States to trade and procure war material for the protection of the essential interests of its security. Nonetheless, this provision is strictly interpreted by the Court and the case discussed here exemplifies that only goods intended for specifically military purposes qualify for the exemption under article 346 TFEU. But what exactly is equipment intended for specifically military purposes?
At issue in case C-615/10 Ins Tiimi is the procurement of the Finnish defense authorities of tiltable turntable equipment. This equipment is used to facilitate the ‘carrying-out of electromagnetic measurements and the simulation of combat situations’. As such it was argued by the Finnish authorities that it was procured for military purposes. Ins Tiimi, a company which lost the tender, did not agree, claiming that the equipment could be used for civilian uses as well. Whether or not the tiltable turntable equipment qualified for the exemption was important because otherwise the procurement procedure had to comply with the public procurement directive (directive 2004/18/EC).
There are essentially two conditions that Member States have to fulfill in order to escape the application of EU law according to article 346 TFEU when procuring military material:
- The measures relating to military procurement must concern ‘arms, munitions and war material’;
- And secondly, those measures must be necessary for the protection of the essential interests of the security of that Member State.
As regards the first condition the Court makes clear that 346 TFEU only applies to products ‘intended for specifically military purposes’. The Court had previously stated that this means that certain dual use goods (goods which can have a civilian and a military purpose such as helicopters and trucks) do not fall under the exemption if those goods are ‘certainly for civilian use and possibly for military use’. The Court then continues and clarifies how to determine whether material is intended for specifically military purposes emphasizing that this must be assessed on the basis of an objective determination of the material itself. It states
‘only if such use is not solely that which the contracting authority intends to confer on it but also […] that which results from the intrinsic characteristics of a piece of equipment specially designed, developed or modified significantly for those purposes.’ (para. 40)
This means, as the Advocate General pointed out, that whether or not a product is intended for specifically military purposes depends on an objective test and is not dependent on use by the military, but by the characteristics of the product. Pencils procured and used by the military do not qualify for example, and neither does the fact that the military intends to use personal computers solely for cyber warfare matter either. What matters is that the products ‘must, in objective terms, have a specifically military nature.’ (para.41)
Applying this test at the products at hand the Court states that the titable turntable equipment
‘which the contracting authority intends to use only for military purposes, can be considered to be intended specifically for such purposes, within the terms of Article 296(1)(b) EC, only if it is established that, unlike the similar material intended for civilian uses invoked by the applicant in the main proceedings, that equipment, by virtue of its intrinsic characteristics, may be regarded as having been specially designed and developed, also as a result of substantial modifications, for such purposes’ (para. 44).
As to the second condition, the Court gives more room to the national court to make an assessment. It reiterates that the Member State needs to demonstrate that ‘it is necessary to have recourse to the derogation provided for in that provision in order to protect its essential security interests’ as well as to show ‘whether the need to protect those essential interests could not have been addressed within a competitive tendering procedure such as that specified by Directive 2004/18’. This is a matter for the national court to determine.
The Advocate General was pretty skeptical as to whether the Finnish authorities fulfilled the second condition, although she did consider that fulfillment of the first condition was conceivable (for her a fundamental modification of the product at hand was required). According to her there was absolutely no evidence of essential security concerns of the part of the Finnish authorities as it had itself reported in a daily newspaper on the operation and purchase of the equipment (no confidentiality issues) and it did not demonstrate that it wished to avoid dependence for its arms supplies on non-member countries.