Noerr | Defence Readiness Omnibus aims to strengthen the European Union

Military defence of the European continent has become one of the key political fields of the Von der Leyen Commission.

In March 2025, the European Commission (“Commission”) underscored in its “White paper for European defence – Readiness 2030” the enormous security risks it sees Europe as being faced by. It pointed out that alongside increased and better coordinated armament activities by the EU Member States, above all a stronger and more resilient European defence industry is central for strengthening defence. The Commission estimates that this will require investments of up to €800 billion over the next four years.

This “ReArm Europe Plan” is now followed by the Defence Readiness Omnibus as a comprehensive set of measures to strengthen the ability of the EU Member States to defend themselves and put their national security strategies on a common European footing. As part of the common security and defence policy (CSDP), the programme aims not only to promote military cooperation, but also to develop new solutions for technological challenges and operational needs.

The Commission sees a key need for action in relation to the following four points:

• Facilitating procurement and transfer of defence-related products within the EU
• Reducing the administrative burden in the European Defence Fund
• Introducing a fast-track permitting regime for defence-related projects
• Clarifying horizontal EU legal provisions (access to financing and competition, environmental and chemicals law) where these create disproportionate or unintended constraints on defence activities.

The Defence Readiness Omnibus envisages important changes and measures above all in the following areas:

EU competition law

The Commission starts by making clear that EU competition rules in principle also apply to the defence sector. However, it advocates that these rules are applied in a way that takes into consideration security and defence needs.

EU State aid law

In view of the prevailing geopolitical landscape, European defence capabilities are increasingly becoming a focus of EU policy. In this context, the Commission emphasises that there is a compelling interest at both EU level and in the EU Member States in significantly ramping up defence production. However, private market operators are often unable to meet this demand in the short term and to a sufficient extent. Against this background, the Commission concludes that State aid to promote defence products and defence-related services may in principle be justified. The Commission regards it as necessary to safeguard essential security interests and believes that it does not necessarily lead to a distortion of competition in the internal market. The Commission outlines possible forms of funding in the Defence Readiness Omnibus:

• Funding for public-remit activities is not State aid: The Commission firstly points out that state measures for public-remit activities related to the exercise of State prerogatives do not constitute relevant State aid for the purposes of Article 107 TFEU. This is because public-remit activities do not meet the criteria of economic activity qualifying them as State aid. This means that, like measures for the functions of a EU Member State’s armed forces, measures for general infrastructure such as widening railway tunnels or reinforcing bridges do not in principle constitute State aid. Therefore it is not necessary to file notifications to and obtain approval for them from the Commission.

Secondly, the Commission points out that even measures which meet the criteria for State aid do not necessarily have to be reported to the Commission:

• Exception under Article 346 TFEU: Here, the Commission primarily addresses Article 346 TFEU. Under Article 346(1)(b) TFEU, the EU provisions do not stand in the way of measures which are taken by a EU Member State in order to protect its essential security interests and do not adversely affect conditions of competition in the internal market.
• Other possible scenarios: Where State aid does not fall under Article 346 TFEU, secondary EU legislation, which in many cases allows aid to be compatible with Article 107 TFEU, would provide a further basis for approval. The Commission expressly refers to the General Block Exemption Regulation (Regulation (EU) No 651/2014), which declares certain categories of State aid as compatible with the internal market without the need for individual notifications to and assessment by the Commission. State aid to facilitate the development of certain economic activities may also be considered compatible with EU law directly on the basis of primary legislation under Article 107(3)(c) TFEU provided it does not adversely affect trading conditions to an extent contrary to the common interest. The production stages for defence-related materials and defence services constitute such an economic activity.
• Assessment criteria used by the Commission: The Commission also announced that when balancing the positive effects against the negative effects of such State aid on competition, it will take account of its contribution to the defence readiness 2030 objective as well as the specificities of the defence market (EU Member States control acquisition and exports of defence-related products and technologies). Positive effects of State aid could for example be a contribution to protection of essential security interests of the EU Member States and a reduction of dependencies on third countries. In addition, the Commission states that it will prioritise the treatment of cases involving defence readiness when approving State aid.

While the Commission is upholding the existing rules on State aid, it is showing EU Member States ways of providing the defence sector with financial support and signalling its own willingness to take account of the importance of increasing production in this sector.

EU funding

Existing EU funding is to be structured in such a way that it enables the defence sector to be effectively supported:

• European Defence Fund (“EDF”): The EDF can be used to promote collaborative defence research and development projects. The aim is to make implementing the existing EDF simpler and more flexible. The intention is to clarify and simplify the award criteria for projects to be funded and make it possible to apply them more flexibly. The Commission intends to get EDF projects running as quickly as possible. It wishes to speed up the evaluation of projects potentially to be funded. Apart from this, completed assessments are to have extended validity and a system for simple and secure exchange of confidential information is to be progressively rolled out.
• Opening up access to EU funds for defence projects: Under the InvestEU Fund, investments in defence are already eligible for limited support. The eligibility criteria for projects to be funded are to be adapted to ensure that the financial instruments available are used effectively. Other EU funding such as the “Accelerator, STEP and Scaleup Europe Fund” is to be opened up to dual-use and defence technologies.

EU merger control

A positive signal for a revival of merger activity in the defence sector comes from the EU merger control authorities: early this month, the Commission approved the formation of a joint venture between BAE Systems (Holding) Limited, Japan Aircraft Industrial Enhancement Co. Ltd and Leonardo S.p.A. The aim of this joint venture is to jointly develop a combat aircraft as part of a trilateral programme between the United Kingdom, Japan and Italy. Although there were horizontal overlaps on the Italian market, these did not raise any competition concerns on the part of the Commission regarding compatibility with the internal market, and the project was therefore approved.

The Commission will take account of the changed security and defence landscape in its ongoing review of the merger control guidelines (more on this at Noerr Insights). In particular, it will assess the overall benefits of improved defence and security within the EU which lead to efficiency gains. Feedback from stakeholders on security and defence aspects in the context of the ongoing consultations is essential. Companies affected by this should therefore take advantage of the opportunity to present their views.

The Commission emphasises the link between defence readiness and competitive markets. Competitive markets promote innovation and cutting-edge technology, as well as adequate and agile production capacity. At the same time, the Commission will continue to seek to ensure that market concentration does not lead to higher prices. EU merger control aims to ensure this.

EU antitrust law

In the field of antitrust law, the Commission addresses cooperation projects between companies in the defence sector and presents the following plans:

• Support when drafting cooperation agreements: The Commission will provide companies in the defence sector with specific guidance, especially where the collaboration is necessary to scale up production or develop and manufacture new products. This would guarantee legal certainty.
• Consideration of efficiencies: When assessing the legal aspects of such cooperative ventures, the Commission promises to consider the efficiencies generated in terms of defence readiness and more resilient defence supply chains.

Environmental, chemicals and product law

A long-standing issue and source of discontent is the joint applicability of civilian rules and regulations. This involves the unconditional application of ordinary industry regulations that cannot reflect the specific characteristics of the defence sector.

Approval proceedings

Where land-intensive approval projects (airports, barracks, military training areas or port facilities) are concerned, criticism is levelled at environmental, water, biodiversity and monument protection laws, which are perceived as being overly strict. The Commission’s paper explicitly encourages EU Member States to apply the exemptions for military use provided for in many European regulations confidently and generously.

Product conformity

A similar, probably even more intense debate has been going on for years about the very specific product-related rules in EU law. These are the product safety regulations for the safety design of industrial products, for example in the areas of machine safety, pressure equipment protection, personal protective equipment, EMC and radio equipment law. The legal policy behind these regulations is to achieve socially desirable goals such as health and environmental protection at an early stage in the technical product design process. This is because a product in a plant or facility that has been constructed in a technically safe manner cannot pose a hazard to users during subsequent operations; the regulatory shift of all structural safety considerations to the technical design process therefore guarantees functional safety “at the source”.

Many of these rules and regulations are or appear to be (at least for defence) too unflexible and overstretch the functional possibilities in the defence sector. However, the Commission’s paper only addresses this issue of joint applicability of civilian regulations in part, since it primarily focuses on chemicals regulations. It is true to say that these have increased massively across the EU over the last decade and have also become a significant challenge for non-military industry. Examples include REACH, RoHS bans, POP bans, CLP labelling regulations and the entire field of biocidal product law. In some cases (as the Commission correctly points out), these product regulations also contain exceptions for the defence sector, meaning that it would seem logical for the industry and market surveillance authorities to make confident use of these provisions as well. The Commission certainly urges those involved to act in this way.

In terms of legal policy, however, the EU still has the task of reviewing all the other substance-related regulations and the full body of product safety regulations and, where applicable, operational safety regulations to determine whether they need to be adapted in the future. There are discussions in the sector regarding a controlled changeover function in the shape of an “operational mode” to be able to guarantee safety equivalent to that in civilian life only in training and exercise situations. On the other hand, it would also be necessary to ask whether exceptions for entire areas of regulation should be made in the technology segment as a whole, in the same way as for the defence sector in the European AI Regulation. Finally, it should be noted that civil product liability (including in the recently revised Product Liability Directive) does not provide any exemption for defence-related goods where the criteria apply.

Public Procurement

Plans to strengthen the EU-wide market for defence equipment include multiple measures to simplify public procurement law. The proposed simplifications relate to Directive 2009/81/EC of the European Parliament and of the Council, which governs the procurement of works, supplies and services in the fields of defence and security (“Defence Procurement Directive”). The aim of these adjustments is to provide EU Member States with the necessary flexibility to respond to new security policy challenges, while simultaneously promoting a competitive and integrated European defence market.

To achieve this goal, a series of innovations are being introduced to amend the existing procurement framework:

• Increase in thresholds: The scope of the Defence Procurement Directive will be significantly restricted by raising the relevant thresholds for supply and service contracts from €443,000 to €900,000 and for works contracts from €5,538,000 to €7,000,000. This is intended to ensure that Directive 2009/81/EC focuses on particularly critical contracts in future, while at the same time reducing administrative burdens for smaller procurement procedures. Going forward, defence contracts in Germany below these thresholds will therefore fall under the (procedurally highly flexible) regime of section 51 of the German Ordinance on Sub-Threshold Procurement (Unterschwellenvergabeordnung ‒ UVgO).
• Procedural flexibility: The EU Member States are to be granted additional flexibility to utilise all available instruments in the field of public procurement. For this purpose, the Defence Procurement Directive will also integrate the open procedure, the innovation partnership and, as a special instrument, the dynamic purchasing system. The innovation partnership, already familiar from the general procurement directive, aims to support the development of cutting-edge technologies and capabilities. It is designed as a two-stage process: in the first stage, an innovative product, service or works is developed, while in the second phase, the purchase follows provided that the innovative development corresponds to the agreed performance levels and maximum costs. However, even outside defence procurement, the innovation partnership remains a niche instrument. It is therefore questionable whether this procedure can make a substantial contribution to strengthening European defence capabilities. A more promising approach appears to be the proposal to create a simplified procedure for the direct acquisition of innovative products and services resulting from research and development projects. These could be awarded through a negotiated procedure without prior publication (Article 2(10) of the draft).
• Temporary derogation for common procurements: For the common procurement of military equipment by contracting authorities from at least three EU Member States, concluded prior to 1 January 2031, a negotiated procedure without prior publication will also be permissible for identical or only slightly modified defence equipment (Article 2(10)(c) of the draft). This aims to enhance interoperability and interchangeability of armed forces equipment (Recital 18 of the draft).
• Accession to cooperation programmes: In order to meet the existing need for more and better collaborative investment (ranging from research into the development of complex systems to commercialisation and procurement) with a view to increasing the European Union’s technological sovereignty (Recital 19 of the draft), the provisions on EU Member States joining cooperative programmes based on research and development for the later phases of the life cycle are laid down and codified in Directive 2009/81/EC (Article 2(6) of the draft).
• Extension of maximum duration of framework agreements: To enable EU Member States to enter into longer-term partnerships with industry and plan their defence procurement needs more reliably, the draft also proposes extending the maximum permissible duration of framework agreements from the current seven years to ten years (Article 2(11) of the draft).
• Significant reduction in reporting obligations: Finally, the draft proposes a reduction in reporting obligations for the procurement of defence equipment in order to lower the administrative burden on EU Member States. This will enable national authorities to focus more intensively on implementing their defence policies and using their resources efficiently (Recital 23 of the draft).

Easier transfer of defence equipment

Furthermore, the Commission intends to simplify the intra-EU transfer of defence-related products, particularly within the framework of EU-funded defence projects. To this end, Directive 2009/43/EC, which governs the transfer of defence-related products within the EU, is to be amended. This is motivated by concerns that lengthy national authorisation procedures for transfers could delay the Union’s defence programmes. Essentially, the proposal includes the following points:

• Expansion of exemptions from licensing requirements: EU Member States will in future waive the requirement for a licence if transfers are necessary for the implementation of EU defence programmes, take place within the framework of structured cross-border industrial partnerships, are made to EU institutions or to the European Defence Agency or are required in the event of a crisis or for the purpose of military assistance.
• Extension of general transfer licences: The scope of general transfer licences will in future cover not only transfers to certified recipients, but also transfers by certified suppliers. EU Member States will also be encouraged to provide for the possibility of additional general transfer licences beyond those currently envisaged in the Directive.
• New general transfer licence for EU projects: New general transfer licences will cover all transfers of defence-related products, both tangible and intangible, arising in the context of EU-funded projects such as the EDF. EU Member States may optionally provide that the licence covers the entire product lifecycle, including production, maintenance and upgrades.
• Access to licensing options: EU Member States will not restrict the use of licensing options for reasons unrelated to the matter at hand. Accordingly, the requirements for general transfer licences will only include criteria that are necessary for ensuring compliance with export controls.
• Delegated acts of the Commission: The Commission will be empowered to determine the minimum content of national general transfer licences by means of delegated acts.

 

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