U.K. Said to Threaten Veto on EU's New Galileo Contract Tenders

(Bloomberg) -- The U.K. is considering vetoing the release of new contract tenders for the European Union’s Galileo satellite navigation system if the bloc doesn’t relax its stance on restricting Britain’s access to the program after Brexit, two officials familiar with the matter said.

European officials are trying to bring forward bids on 400 million euros ($471 million) of contracts to design and develop the next set of satellites for the program, according to a U.K. official familiar with the situation. The tenders, for work on the EU’s equivalent of the U.S. Global Positioning System, were originally planned for next year.

A vote on issuing the tenders could be held as soon as a European Space Agency meeting in mid-June, but the decision needs to be unanimous, giving the U.K. a veto.

A commission spokesperson said there’s a need to weigh changes in Britain’s role.

“Now is the right time to start thinking about adjusting cooperation regarding the Galileo program to the way the EU cooperates with other third countries in such matters,” the spokesperson said.

It’s the latest episode in a long-running fight over what role Britain can keep in the satellite project after it leaves the bloc. Both the EU and U.K. have said they want to have a deep security and defense partnership after Brexit -- and it’s one of the areas where the U.K. has most leverage. Britain said last week that its access to Galileo would be a test of how good the future security relationship could be and is also threatening to set up a rival system if access to Galileo is restricted.

The EU says Britain will become a third country and therefore its participation will be subject to a new agreement. It has also raised the prospect of excluding Britain from the project’s Public Regulated Service -- the encrypted navigation signals used for government and defense purposes.

Tender Timing

The U.K. view is that if contracts are tendered now, there’s so much doubt about what Britain’s future involvement will be that U.K. companies will be discouraged from bidding. Instead, the U.K. wants time to broker a compromise that enables continued involvement for the country and its space industry, which would give businesses the confidence to bid, one of the officials said.

Science Minister Sam Gyimah said on Monday that Britain may withdraw from the program and set up its own satellite navigation system if the EU continues to play “hardball.”

Another concern for Britain is that the contracts are worded in a way that would effectively exclude British bidders. That’s because companies winning contracts would have to be able to guarantee the work is carried out in EU territory.

British-based companies including Surrey Satellite Technology Ltd. so far have won 770 million euros of contracts for Galileo, which will ultimately consist of an array of 30 operational satellites, including six backups. The U.K. Space Agency two days ago wrote to British companies in the sector criticizing the EU stance and telling them that they will need U.K. permission to carry out any new work on the program.

“Excluding the U.K. and our unique expertise will lead to increased costs and delays in the deployment of Galileo,” according to the letter, which was sanctioned by Business Secretary Greg Clark. “Without clear assurances that U.K. industry can collaborate on an equal basis and without continued access to the necessary security-related information, the U.K. could end its participation in the project.”

Britain maintains it wants to remain fully involved in the project.

“Ministers continue to work to secure the U.K.’s ongoing industrial involvement in all aspects,” according to the U.K. Space Agency letter. “The U.K. Government has been clear that it strongly disagrees with the European Commission’s position as we believe it is in our mutual interest to remain in Galileo as part of our steadfast commitment to the continent’s security.”

--With assistance from Jones Hayden and Jonathan Stearns

To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net.

To contact the editors responsible for this story: Flavia Krause-Jackson at fjackson@bloomberg.net, Emma Ross-Thomas

©2018 Bloomberg L.P.