Europe’s Defence Reset: Major reform efforts unveiled in Brussels and Berlin

At the heart of the Commission’s initiative lies the recognition that Europe’s current defence delivery processes are too slow and too fragmented. To address this, the Commission presented an “Omnibus” proposal, which refers to its structure in form of a legislative package spanning multiple areas of EU law. The Omnibus Package introduces mechanisms to facilitate joint procurement among Member States, clarify the application of State aid and competition rules, and expand access to financing under instruments such as InvestEU and the Strategic Technologies for Europe Platform (STEP). These changes are designed to help Member States pool demand more effectively and to increase private-sector involvement in key defence capabilities.

In addition, the proposal would require Member States to grant permits for so-called defence readiness projects, including defence production facilities, within 60 days. This is a highly ambitious goal that does not align with the reality of planning and construction permits in most EU Member States, in particular in a highly sensitive field like defence. While exceptions may apply depending on the nature, complexity, location or size of the proposed project, these are also currently capped at an additional max. 60 days. It remains to be seen if a majority of Member States will accept this interference with their national administrative procedures. 

The Commission also proposes to simplify procedures under EU rules that intersect with defence activities, including those governing chemicals (REACH), infrastructure permitting, and environmental assessments. These changes are designed to remove bottlenecks that have hampered the ramp-up of production lines and cross-border investments in recent years.

Part of the EU’s strategic autonomy agenda in the defence space is that access to Union funding remains limited to companies established in the EU or associated countries that are not controlled by entities from outside the EU. There are narrow exceptions, including the possibility of Member State derogations and recognition of “trusted partner” relationships with third countries via Security and Defence Partnerships with the EU, such as the ones with Japan, South Korea, (very recently) the United Kingdom, and potentially Canada in the future. 

In practice, this means that non-EU companies – including those from allied countries – face structural barriers to participating in EU-funded programmes unless they can structure their operations to meet EU ownership and control thresholds. The proposed amendment to the InvestEU Regulation in the Omnibus Package clarifies now that entities established in the EU but controlled by non-EU entities may access InvestEU funding if they are already covered by a guarantee under an EU co-funded defence programme approved by a Member State. This avoids the need for a separate InvestEU-specific guarantee. Only where such a guarantee does not exist would a company need to provide one, potentially relying on mitigation measures from a foreign investment screening decision under the EU FDI Regulation.

A key component of the package is a legislative proposal to revise Directive 2009/81/EC, the EU’s framework for defence and security procurement. The revised directive seeks to make defence procurement faster, more flexible, and more suited to innovation-driven projects. Amongst others, the proposal raises the financial thresholds for applying the directive, with the threshold for service and supply contracts increased from EUR 443,000 to EUR 900,000, and for works (construction) contracts from EUR 5,538,000 to EUR 7,000,000. The proposed changes also include a clearer legal basis for framework agreements, allowing Member States to conduct multiple procurements under a single contract vehicle, more permissive rules for joint procurement initiatives between Member States, and tailored procedures for the procurement of emerging or fast-moving technologies. 

Behind the Commission’s labelling of this reform as making defence procurement more dynamic, this marks a significant EU policy shift: when Directive 2009/81/EC was introduced 16 years ago, the underlying assumption was that more formalised, transparent competition would lead to greater efficiency and better value in defence procurement, and to a common market for defence. However, that expectation has not materialised as expected in practice. Procurement remains slow and fragmented in many EU markets – prompting the EU to now prioritise speed and strategic coherence over procedural rules and competition. 

In parallel, the Commission has also proposed revisions to Directive 2009/43/EC on intra-EU transfers of defence-related products. The reforms focus on simplifying the licencing system, expanding the use of general and global licences, and reducing the administrative burden for certified companies. In particular, the updated regime would make it easier for certified suppliers to move products across Member States without repeated approvals, thereby enhancing the resilience and responsiveness of the European defence industrial base.

At national level, Germany is considering a reform of its procurement rules which are based on the current version of EU Directive 2009/81/EC. Key elements for a law overhauling Germany’s defence procurement system have just been circulated. 

According to the leaked summary of the draft, the proposed reform would even more significantly reduce formal procedural requirements and enable direct awards. Procurements for the Federal Army below EU thresholds should be significantly simplified by a considerable increase in the German value thresholds. Moreover, security of supply through the production of weapons, ammunition, and war material on German territory is generally considered to be a significant security interest which allows for national rules. The draft relies on the EU Treaty rules of Article 346 TFEU, enabling Member States to deviate from the EU Procurement Rules altogether. 

The overarching goal is to make procurement more agile and responsive, particularly in areas where delays could compromise Germany’s readiness or ability to support EU and NATO partners. These proposed changes closely mirror the Commission’s objectives, suggesting that Germany could serve as a test case for the more flexible procurement culture the EU seeks to promote. If implemented, the reform could accelerate the pace of contract awards in critical capability areas and make Germany a faster-moving buyer of defence goods and services.

At the same time, competitors of selected suppliers will find it more difficult to challenge direct award decisions. In review procedures of procurement cases, the suspensive effect of appeals to the Higher Regional Court Düsseldorf will be lifted so that bid protests do not hold up the procurement process. Moreover, Germany considers to implement the possibility to exclude bidders from third countries, i.e. non-EU players. 

The leaked proposal forms part of the new Federal Government’s response to the same set of challenges as identified at EU level. The German government has publicly committed to spending five percent of GDP on defence in the coming years, a figure that would represent a dramatic increase in annual procurement budgets.

The defence reforms at European and German level form part of a general shift in thinking about the role of competition and competition law enforcement in times of a security crisis. 

Recent public statements as well as enforcement decisions suggest a growing flexibility in how competition rules are applied to defence cooperation. In early June, the Commission approved under its merger rules the creation of a joint venture between UK, Italian and Japanese partners for the Global Combat Air Programme (GCAP). The transaction was cleared without remedies, with the Commission acknowledging the strategic rationale and limited competitive overlap. The Omnibus Package also states that the Commission is considering defence and security aspects in its ongoing review of the Merger Guidelines. Moreover, the Commission stands ready to provide antitrust guidance on cooperation projects in the defence and security space. 

Similarly, the German Federal Cartel Office (FCO) recently approved a joint venture for the development of the Main Ground Combat Systems (MGCS), a new armoured vehicle platform. In the same vein, the FCO also cleared another merger in the military vehicles space recently. Both cases show that the FCO is taking account of the broader policy context and the importance of European industrial cooperation. 

These decisions suggest that competition authorities are willing to take a more permissive approach when the strategic importance of a deal outweighs traditional concerns about market concentration. However, this flexibility does not extend to foreign investment screening, which remains stringent across the EU. Transactions involving non-EU acquirers – and in many cases even investors from within the EU – of defence assets continue to face close scrutiny under national and EU-level FDI regimes, and there is no indication that these rules will be relaxed in the near future.