Annex V: Industrial Policy Article I 1. In implementing the industrial policy referred to in Article VII of the Convention, the Director General shall act in conformity with the provisions of this Annex and with the directives of the Council. 2. The Council shall keep under review the industrial potential and industrial structure in relation to the Agency's activities, and in particular (a) the general structure of industry, and industrial groupings, (b) the degree of specialisation desirable in industry and methods of achieving it, (c) the co-ordination of relevant national industrial policies, (d) interaction with any relevant industrial policies of other international bodies, (e) the relationship between industrial production capacity and potential markets, (f) the organisation of contacts with industry, in order to be able to monitor and, where appropriate, adapt the Agency's industrial policy. Article II 1. In the placing of all contracts, the Agency shall give preference to industry and organisations of the Member States. However, within each optional programme covered by Article V.1 (b) of the Convention, particular preference shall be given to industry and organisations in the participating States. 2. The Council shall determine whether and to what extent the Agency may derogate from the above preference clause. 3. The question whether an enterprise should be considered to belong to one of the Member States shall be settled in the light of the following criteria : location of the enterprise's registered office, decision-making centres and research centres, and territory on which the work is to be carried out. In doubtful cases the Council shall decide whether an enterprise shall be considered to belong to one of the Member States, or not. Article III 1. The Director General shall, at an early stage in the contract action and before invitations to tender are sent out, submit for the approval of the Council his proposal on the procurement policy to be followed, for any contract which either (a) has an estimated value above limits which shall be defined in the rules concerning industrial policy and which will depend on the nature of the work; or (b) is, in the opinion of the Director General, not adequately covered by the rules concerning industrial policy or by additional guidelines established by the Council, or might give rise to a conflict with those rules or guidelines. 2. The additional guidelines referred to in paragraph 1 (b) shall be established from time to time by the Council if it considers them helpful for the purpose of distinguishing those areas where prior submission under paragraph 1 is necessary. 3. The Agency's contracts shall be awarded directly by the Director General without further reference to the Council except in the following cases: (a) when the evaluation of the offers received suggests a recommendation for the choice of a contractor which would be contrary either to the prior instructions issued by the Council under the terms of paragraph 1, or to any general guidelines on industrial policy adopted as a result of the Council's studies under Article I.2; the Director General shall then submit the case to the Council for decision, explaining why he considers a deviation to be necessary and indicating also whether another decision by the Council would constitute, technically, operationally or otherwise, an advisable alternative; (b) where the Council has decided for specific reasons to undertake a review before a contract is awarded. 4. The Director General shall report to the Council, at regular intervals to be specified, on the contracts awarded during the previous period, and on the contract actions planned for the subsequent period, in order that the Council may monitor the implementation of the Agency's industrial policy. Article IV The geographical distribution of all the Agency's contracts shall be governed by the following general rules: 1. A Member State's overall return coefficient shall be the ratio between its percentage share of the total value of all contracts awarded among all Member States and its total percentage contributions. However, in the calculation of this overall return coefficient, no account shall be taken of contracts placed in, or contributions made by Member States in a programme undertaken (a) under Article VIII of the Convention for the establishment of a European Space Research Organisation, provided that the relevant Arrangement contains provisions to this effect or that all participating States subsequently unanimously so agree; (b) under Article V.1 (b) of the present Convention provided that all original participating States unanimously so agree. 2. For the purpose of calculating return coefficients, weighting factors shall be applied to the value of contracts on the basis of their technological interest. These weighting factors shall be defined by the Council. Within a single contract having a significant value, more than one weighting factor may be applied. 3. Ideally the distribution of contracts placed by the Agency should result in all countries having an overall return coefficient of 1. 4. The return coefficients shall be computed quarterly and shown cumulatively for the purpose of the formal reviews referred to in paragraph 5. 5. Formal reviews of the situation of geographical distribution of contracts shall take place every three years. 6. The distribution of contracts between formal reviews of the situation should be such that, at the time of each formal review, the cumulative overall return coefficient of each Member State does not substantially deviate from the ideal value. For the first three-year period, the lower limit for the cumulative return coefficient is fixed at 0.8. At the time of each formal review, the Council may revise the value of this lower limit for the subsequent three-year period, provided that it shall never be lower than 0.8. 7. Separate assessments shall be made, and reported to the Council, of the return coefficients for various categories of contract to be defined by it, in particular advanced research and development contracts and contracts for project-related technology. The Director General shall discuss these assessments with the Council, at regular intervals to be specified, with the aim of identifying the action needed to redress any imbalances. Article V 1. If, at one of the formal reviews to be held at the end of each three-year period, the overall return coefficient of any Member State is found to be below the lower limit defined in Article IV.6, the Director General shall submit to the Council proposals designed to redress the situation within one year. These proposals shall keep within the Agency's rules governing the placing of contracts. 2. If, after this period of one year, the imbalance still persists, the Director General shall submit to the Council proposals in which the need to remedy the situation takes precedence over the Agency's rules governing the placing of contracts. Article VI Any decision taken on industrial policy grounds which has the effect of excluding a particular firm or organisation of a Member State from competing for the Agency's contracts in a particular field shall require the agreement of that Member State.