In many EU Member States, the 2022 Russian invasion of Ukraine led to significantly increased defence spending to finance a built-up of the armed forces. The necessary rearmament of these Member States requires the efficient procurement of considerable quantities of new equipment. Most of this rearmament is conducted and financed on a national basis. A prime example is Germany with its €100 billion 2022 special defence fund and 2025 unlimited defence fund (ca.€500 billion+), increasing its forces from 185,000 to 260,000 by the end of the decade. Further examples are The Netherlands and Sweden, as well as frontline Member States Finland and Poland. Other Member States, notably Italy, France, and Spain have made more limited efforts towards rearmament. However, the EU is stepping up, on an intergovernmental basis through the European Defence Agency and on a supranational basis with programmes largely supervised by the European Commission’s new Directorate General for Defence Industries and Space (DEFIS). This includes a European Defence Industrial Strategy (EDIS), a European Network of Defence-Related Regions (ENDR), and funds, such as the European Defence Fund (EDF) with €7.3 billion in 2021-27, the European Defence Industry Reinforcement through Common Procurement Act (EDIRPA) with €310 million, the Act in Support of Ammunition Production (ASAP) with €500 million, and the European Defence Industry Programme (EDIP) with €1.5 billion. The Security Action for Europe (SAFE) programme consists of €150 billion in long-term maturity loans and ReArm Europe/Readiness 2030 is relaxing the Stability and Growth Pact to allow Member States to borrow €650 million for defence over four years. While the grants are relatively small and the rest are loans, the EU has been getting on a war footing, assuming a new role as a defence actor as part of a wider EU defence policy.
The traditional role of the Commission as initiator of internal market legislation can affect defence. In 2009 the EU legislator passed the “EU Defence Package” with two hard law Directives, Directive 2009/81 on defence and security procurement and Directive 2009/43 on intra-Union transfers, backed up before and after 2009 with several soft law instruments. The earlier introduce the first ever supranational defence procurement regime with common rules on publication, specifications, qualification, procedures, award criteria, and even review proceedings. The latter introduced a common transfers regime moving from individual to general and global licences. These Directives were transposed in the national laws of the Member States by 2013. In their 2016 reviews of these Directives the Commission argued that no amendments were necessary, but it can be doubted that the Member States would have had the political will to amend the instruments back in 2016.
However, in their 2025 ‘Defence Readiness Omnibus’ the European Commission proposes the amendment of the 2009 Directives, a process to be completed by the end of 2026. With regards to Directive 2009/81 on defence procurement, they propose eight main amendments. First, the thresholds above which the Directive applies would be raised from €400,000 to €900,000 for supplies and services and from €5 million to €7 million for works, thereby pushing 310 of 1,000 contracts outside the scope of the instrument. Second, flexibility would be increased by adding two more procurement procedures to the Directive, namely the open procedure and dynamic purchasing systems. These very open procedures can only be used for simple purchases, and their inclusion will not have much impact. Third, the innovation partnership procedure would be made more flexible to facilitate innovation in defence contracting. Fourth, a simplified procedure for the direct procurement of innovative products and services resulting from parallel research and development projects of Member States would aim to reduce administrative burden and increase speed, and fifth, with the same objective, several statistical reporting obligations would be removed. Sixth, it is proposed to extend the maximum possible duration of framework agreements with industry to ten years to allow Member States to establish longer-term partnerships with the defence industry so that the latter can benefit from greater certainty in procurement planning and orders. This, according to the Commission, would also reduce the current order book planning problems and bottlenecks in production. Seventh, the Commission proposes to create rules on procurement involving contracting authorities and entities from different Member States to allow for greater flexibility and better legal predictability in Member States’ relations with their allies. Eighth and finally, it is proposed to facilitate and speed up collaborative procurement of identical defence products (or products subject only to minor changes) by multiple Member States by enabling the use of the negotiated procedure without competition (‘single source’). This is intended to allow to achieve better economies of scale, reduce fragmentation, and improve interoperability.
On the one hand, these proposals are to be welcomed as they point towards a necessary reform of the Directive, would increase flexibility, facilitate innovation, simplify rules, and reduce administrative burden. Moreover, they would facilitate further collaboration between Member States and a longer duration of agreements with industry.
On the other hand, the proposals are underwhelming, as they do not sufficiently address the problems that had already surfaced before 2022 and have intensified or been added to in the new security situation after the invasion of Ukraine. Member States need to preserve their defence industries not (just) for economic but for national security reasons, including to retain a lever in the evolving reorganisation of the European defence market. Security of supply, which can require the domestic production of a defence product, is even more important in times of crisis, also when Member States want to buy more and faster than the industries can deliver. Moreover, security of information, the necessity to protect confidentiality, can become a bigger issue in times of crisis. These needs can often only be achieved by a direct award to the national provider, which can currently only be done outside the Directive, using the Treaty’s armaments exemption in art.346 TFEU. Only ca 10% of defence contracts were awarded inside the Directive before 2022, a figure which has since even gone down. The legislator is therefore making a considerable effort to amend a Directive that covers only a small and decreasing share of the market. Maybe it is time for the EU legislator to start thinking out of a strict internal market box, for example by allowing the use of the negotiated procedure without competition to preserve a key national defence industrial capacity to ensure security of supply and/or to retain a domestic industrial capacity as a lever for negotiating cooperation with other Member States. Another option could be to allow Member States to require prime contractors from another Member State to integrate domestic companies into their supply chains. Without bolder changes, the 2026 reform will be a disproportionate legislative effort with little impact, a smokescreen trying to hide the diminished relevance of the internal market for defence goods and services.
Sources:
Defence Readiness Omnibus Proposal COM (2025) 820 final (17 June 2025)
Commission Staff Working Document C (2025) 2190 final (3 November 2025)
Defence Readiness Roadmap (“Preserving Peace”) JOIN (2025) 27 final (16 October 2025)
Joint White Paper for European Defence Readiness 2030 JOIN (2025) 120 final (March 2025)
Directive 2009/81/EC of the European Parliament and of the of 13 July 2009 on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security, and amending Directives 2004/17/EC and 2004/18/EC [2009] OJ L216/76-136
Directive 2009/43/EC of the European Parliament and of the Council of 6 May 2009 simplifying terms and conditions of transfers of defence-related products within the Community, [2009] OJ L146/1
Report from the Commission to the European Parliament and the Council on the implementation of Directive 2009/81/EC on public procurement in the fields of defence and security, to comply with Article 73(2) of that Directive COM(2016)762 final.