Cooperation in connection with the use of outer space for exclusively peaceful purposes is not only the leitmotif of the Outer Space Treaty, but also of the Convention establishing the European Space Agency (ESA). The Convention sets forth a set of cooperative mechanisms through a variety of space activities and programmes, long term space policy, coordination of European national space programmes and a very specific and unique industrial policy. A short introduction to ESA’s programme structure is imperative for the understanding of the uniqueness of said policy.  The Agency’s Convention makes a clear distinction between mandatory activities, in which all Member States participate according to their relative gross national product (GNP), and optional programmes, which allow ESA Member States and others (for example international organisations) to participate based on voluntary contributions and only if they wish to do so. This distinction between the two different set of programme “types” also has consequences on ESA’s industrial policy, especially pertaining to achieving an equilibrium between keeping a balanced return and free competition.

The Agency’s industrial policy is based on a very unique set of objectives, which are stipulated in Article VII of the Convention. According to said article, the industrial policy of ESA must be cost effective, it should improve the worldwide competitiveness of the European industry, ensure that all Member States participate in an equitable manner, having regard to their financial contribution and exploit the advantages of free competitive bidding. The third objective presented here is the particular component of Article VII, as it lays the foundation for measures in connection with fair distribution of contracts among Member States, based on a geographical return calculation method. The “fair return” objective and industrial policy of ESA is further defined in Annex V of the Convention, which stipulates a domestic preference principle in connection with the principle of fair return. The latter meaning that Member States’ national industries must be awarded contracts with a value almost equal to their respective contributions to ESA’s budget, ergo a “fair return” in proportion to their contributions. The return coefficient should ideally be at 1:1, with a possible derogation to no less than 0,8.

The outcome of ESA’s particular industrial policy, but also its procurement system, is that roughly 90 percent of the Agency’s budget is spent on contracts with the European space industry. This is truly unique and allows for a growth within the European space sector, which goes beyond the well-established enterprises to benefit medium and small industry alike.