EU defence procurement reform – key developments for upcoming defence and security tenders

1. Europe is reforming defence procurement law

The European Commission is currently preparing a fundamental revision of the Defence and Sensitive Security Procurement Directive (DSPD), Directive 2009/81/EC. Unlike the general public procurement framework under Directive 2014/24/EU, this DSPD has not yet undergone a comprehensive review. The initiative is driven by the evolving security environment in Europe, the continued expansion of the European defence industry and the objective of facilitating joint procurement within the EU.

The reform is expected to proceed in two stages. Targeted simplification measures are planned in the short term, while a comprehensive revision of the DSPD is being prepared in parallel.

For companies that already participate in European defence procurement procedures, or intend to do so in the future, early and careful monitoring of the announced changes is advisable.

Key takeaways for defence suppliers

• Higher procurement thresholds will reduce procedural burdens for smaller contracts.
• Joint procurement between Member States is expected to become significantly easier.
• New “Buy European” requirements could affect eligibility for companies subject to non-EU ownership or control.
• Greater use of EU procurement rules may create additional opportunities for cross-border market access.
• Defence contractors should review ownership, governance and consortia arrangements in anticipation of future eligibility assessments.

Stage 1: The Defence Omnibus: short-term simplifications

Through the so-called Defence Omnibus, the European Commission intends to remove existing obstacles and accelerate defence procurement in the short term. This accelerated approach is designed to address areas in which simplifications can be achieved without lengthy legislative procedures. Political agreement between the Council and the European Parliament has already been reached. Formal adoption by both institutions is expected in the second half of 2026. Implementation by the Member States can therefore be expected in 2027 and 2028.

The package initially focuses on the following measures to targeted align the defence procurement regime more closely with the general public procurement framework:

• Increase of procurement thresholds: for supply and service contracts from EUR 443,000 to EUR 900,000 and for works contracts from EUR 5.54 million to EUR 7 million.
• Extension of the maximum duration of framework agreements: from seven to ten years.
• Introduction of additional procedures from Directive 2014/24/EU: in particular, the open procedure, dynamic purchasing systems, innovation partnerships and the possibility of de minimis contract modifications.
• Temporary exemption: allowing the use of the negotiated procedure without prior publication for the acquisition of commercially available standard products, commonly referred to as off-the-shelf products, by three or more Member States.
• Revised mandatory general transfer licences: to facilitate and simplify the transfer of defence-related products within the EU.
• Revised mandatory general transfer licences: to facilitate and simplify the transfer of defence-related products within the EU.

The objective is to enable contracting authorities to conduct procurement procedures more quickly and efficiently in light of current security challenges, and to extend proven instruments from the general public procurement framework to the fields of defence and security.

In addition, the political agreement includes several new provisions:

• Joint procurement: Several Member States may establish a joint procurement body. In such cases, either the procurement regime of the Member State in which the joint body is established or that of the Member State in which the procurement is conducted will apply. As joint procurement and multinational defence programmes become more common, businesses operating across multiple jurisdictions should ensure alignment between EU and national procurement requirements when structuring bids and consortia.
• “Buy European” requirements for certain direct awards: Targeted participation restrictions may be introduced for clearly defined procurement scenarios. In this context, the ownership and control structure of participating companies will become a relevant criterion. The concept of “control” extends well beyond the mere majority ownership of shares. According to the European Commission’s Guide for Applicants under the European Defence Fund, the competent authorities examine the entire governance structure of an undertaking. This includes, in particular, the ownership structure, shareholder rights, rights to appoint members of management bodies, veto rights, commercial relationships, financing arrangements and any other mechanisms through which a parent company from a non-associated third country could exercise decisive influence over the subsidiary. An EU-incorporated company that is wholly owned by a US, UK, or other non-associated parent company therefore does not automatically satisfy the eligibility requirements solely because it has its registered office within the Union. Conversely, foreign ownership does not automatically result in exclusion from participation. For these companies, eligibility assessments may become a strategic consideration, making an early review of ownership and governance structures advisable before tenders are launched.

The proposal would also expand the ability of Member States to grant national exemptions for defence purposes under the REACH Regulation. Comparable exemptions under other chemicals legislation, in particular the CLP Regulation and the Biocidal Products Regulation, are to be harmonised accordingly.

The proposal further recommends granting Member States that co-finance European Defence Fund (EDF) projects explicit access rights to the results of those projects for non-commercial purposes. This would include, for example, testing, certification, integration into national systems and defence planning. In addition, clearer contractual rules should be established to define the scope and exercise of those access rights.

Stage 2: The full revision of the DSPD

The second stage provides for a fundamental recast of Directive 2009/81/EC. The Commission has announced its legislative proposal for the third quarter of 2026. This will be followed by the ordinary legislative procedure. Given the political importance of the initiative, the new directive could enter into force as early as 2027 or 2028. Implementation by the Member States is therefore likely to take place in 2029 and 2030.

Although the final legislative proposal has not yet been published, a key reform priority is already emerging that companies operating in the defence sector should take into account at an early stage.

The central focus is the restriction of the application of the exemption provided for in Article 346 TFEU. The European Commission seeks to ensure a clearer and more uniform application of this exemption across the EU. If this approach is adopted, a larger share of defence procurement may in future be conducted under European procurement rules, rather than being exempted on the basis of national security interests.

This could lead to more transparent and competitive tender procedures and broaden market access for companies established in the European Union.

2. Looking Ahead

While most of the proposed changes are not expected to take effect before 2027 at the earliest, businesses active in the defence sector should begin assessing their potential impact now. Particular attention should be given to ownership and governance structures, consortia arrangements and future participation in joint procurement initiatives and EDF-funded projects.

As these reforms progress, businesses will need to assess their implications not only at EU level but also across the Member States in which they operate. The interaction between EU procurement rules and national implementation measures is likely to become increasingly relevant, particularly in the context of joint procurement and multinational defence programmes. This will be important not only for European defence companies but also for non-EU groups seeking to access procurement opportunities within the European defence market.

Organisations seeking to understand the practical implications of these developments across multiple jurisdictions may wish to discuss them with our regional Defence Team.