European Defence Projects of Common Interest – opportunities and action points for companies in CEE/SEE

A practice-oriented analysis of European Parliament report A10-0014/2026

With report A10-0014/2026 of 10 February 2026, the European Parliament has outlined the framework for European defence cooperation in the years ahead: four flagship projects, a joint procurement framework and a clear EU preference throughout the supply chain. For companies, this indicates where contracts are likely to arise and which participation, compliance and contractual requirements will accompany them.

Key points

• Four flagship projects covering counter-drone capabilities, the eastern flank, air and missile defence and space, will drive European defence cooperation and indicate the capability areas in which contract opportunities are likely to emerge.
• EDIP, SAFE and the new SEAPs provide the legal framework for joint procurement. Instead of 27 separate national tenders, a coordinated market with larger volumes is emerging, with a target of at least 40 % joint procurement by the end of 2027.
• An ambitious EU preference framework is intended to favour EU companies while integrating SMEs and Member States emerging defence industries. This presents a significant opportunity for companies in CEE/SEE, supported by national rules such as Austria’s Federal Defence and Security Procurement Act 2012 (BVergGVS 2012).
• Actual participation will ultimately be determined at contract level. Workshare arrangements, liability caps, allocation of background and foreground intellectual property, export control requirements and cyber security obligations will need to be addressed at an early stage.

1. Europe’s defence at a turning point

Europe’s security landscape has changed fundamentally since 2022. Russia’s war of aggression against Ukraine, the growing number of cyber attacks on critical infrastructure and hybrid threats along the EU’s eastern borders have prompted EU Member States to reassess their defence policies. At the NATO summit in The Hague in June 2025, 23 EU and NATO states committed to spending 5 % of their GDP annually on defence and security, representing an increase without historical precedent.
Higher spending alone, however, is insufficient. According to findings by the European Commission, 78 % of EU Member States’ defence procurement between February 2022 and June 2023 took place outside the European Union, with 63 % directed to suppliers in the United States. Without a functioning European defence market, billions of euros risk being lost to fragmentation and inefficiency.

Against this background, the European Parliament presented report A10-0014/2026 on European Defence Projects of Common Interest on 10 February 2026. The report sets out an ambitious framework for pan-European defence cooperation and, for companies, represents far more than a political statement. It provides a clear indication of the areas in which contracts are likely to emerge over the coming years and the requirements that are expected to accompany them. For companies in Central, Eastern and South-Eastern Europe (CEE/SEE) in particular, this creates substantial business opportunities.

2. The flagship projects and their capability areas

The report builds on the Preserving Peace – Defence Readiness Roadmap 2030 and identifies four initial European Readiness Flagships. The European Drone Defence Initiative aims to establish an interoperable, multi-layered system for detecting, tracking and neutralising drones, including precision strike capabilities. It will begin with pilot projects involving a smaller group of Member States before being scaled up to provide 360-degree coverage. Eastern Flank Watch is intended to strengthen the EU’s eastern borders by integrating ground defence, situational awareness, air defence, counter-drone capabilities and maritime security across the Baltic Sea and Black Sea regions. The European Air Shield seeks to establish an integrated European air and missile defence system, while the European Space Shield focuses on securing space as a strategic domain for communications, reconnaissance and navigation.

Across these projects, the report identifies the following priority capability gaps: air and missile defence; artillery, missiles and ammunition; drones and counter-drone systems; strategic enablers (including space and critical infrastructure); military mobility; cyber capabilities, artificial intelligence and electronic warfare; ground combat and maritime security. This list is more significant in practice than it may appear at first sight. It identifies the areas in which tenders are likely to be issued and extends well beyond the traditional defence manufacturing sector. For example, a Czech sensor manufacturer developing radar components for drone detection could be well placed to join a consortium for the European Drone Defence Initiative as a tier-2 supplier, provided it satisfies the industrial participation criteria discussed in section 4.

3. Tendering and joint procurement mechanisms

A central objective of the report is to overcome the fragmentation of national defence procurement. In 2022, only 18 % of Member States’ equipment expenditure was channelled through collaborative EU procurement, well below the collective target of 35 %. The Preserving Peace – Defence Readiness Roadmap 2030 now sets a target of at least 40 % joint procurement by the end of 2027.

Four instruments form the core legal framework for this. At the centre is the EDIP Regulation (EU) 2025/2643, establishing the European Defence Industry Programme on 16 December 2025. The Regulation creates the framework for European Defence Projects of Common Interest (EDPCIs). Under Article 35 of the EDIP Regulation, EDPCIs are identified through Council implementing acts based on proposals submitted by the European Commission. The Commission submitted the corresponding proposal on 3 July 2026 as COM(2026) 358 final. In addition, the SAFE Regulation (EU) 2025/1106 (Security Action for Europe) of 27 May 2025, based on Article 122 TFEU, serves as a financing and procurement instrument aimed at strengthening the European defence industry under ReArm Europe/Readiness 2030 initiative. For collaborative defence procurement initiatives within the flagship projects, EDIP introduces a dedicated legal framework through Structures for European Armament Programme (SEAPs). Alongside these mechanisms, Directive 2009/81/EC remains relevant as the EU defence procurement directive governing certain public works, supply and service contracts in the fields of defence and security.

Under the report, procurement within flagship projects is expected to be carried out jointly by participating Member States. For companies, this fundamentally changes the procurement landscape. Instead of 27 separate national tenders, a coordinated market with larger contract volumes is emerging, while requirements relating to interoperability and cross-border cooperation are likely to become more demanding.

Companies should therefore monitor the development of the planned EDPCIs and their associated governance mechanisms from an early stage. Organisations already involved in PESCO or European Defence Fund (EDF) projects may enjoy a significant advantage when competing for future flagship project contracts.

4. Localisation and industrial participation criteria

The report calls for an “ambitious and dynamic EU preference” in defence procurement. The objective is to reduce dependence on non-EU suppliers and strengthen the European Defence Technological and Industrial Base (EDTIB). In practical terms, EU companies are expected to receive preference in procurement procedures relating to flagship projects. SMEs, mid-caps, start-ups, research institutions and innovation hubs are also expected to play a greater role in defence supply chains. In parallel, the report seeks to ensure balanced participation by all Member States, including those with developing defence industries. The framework also provides for participation by Ukraine, EEA-associated states and partner countries that maintain security and defence partnerships with the EU.

Of particular relevance to companies in CEE/SEE is the report’s emphasis on regional spillover effects and the need for mechanisms that enable meaningful participation of all Member States regardless of economic size. Flexible co-financing arrangements are intended to ensure that smaller states can participate effectively in flagship projects.

National implementation requirements should also be taken into account. In Austria, the Federal Defence and Security Procurement Act 2012 (Bundesvergabegesetz Verteidigung und Sicherheit 2012, BVergGVS 2012) implements the EU defence procurement directive. Companies seeking to participate in EDPCIs must therefore comply with both EU-participation requirements and national implementing provisions.

The importance of this interaction is illustrated by the report’s focus on cooperation with Ukraine. Ukraine’s defence industry has developed substantial expertise in drones and electronic warfare under combat conditions. One potential model would involve an EU consortium integrating Ukrainian drone technology into EU-based production facilities. Key challenges include export and transfer licensing requirements, protecting Ukrainian background IP and ensuring that the resulting products satisfy EDTIB preference criteria. These issues are explored further in the sections that follow.

5. Supply chain integration and cooperation models

Flagship projects will require cross-border industrial cooperation within complex consortia. The report highlights the importance of interoperability and supply chain resilience and calls for both to be strengthened systematically through the EDPCI framework. In practice, many of the key issues will need to be addressed through the contractual arrangements between participating companies. This is where a range of recurring commercial and legal considerations arise.

A key consideration is the consortium agreement and the allocation of workshare. Roles, responsibilities and work packages must be clearly defined. Liability caps, delay mechanisms and change control procedures become particularly important where multiple companies from different jurisdictions are working together. Equally important is the distinction between background and foreground IP. Companies must determine what intellectual property each partner contributes and who will own newly developed intellectual property generated during the project. Public authorities will often seek broad rights to use foreground IP created through publicly funded programmes. When subcontractors are engaged, companies must ensure that the entire tiered supply chain remains compliant with EDIP requirements and EU preference rules. For critical components, end-use certificates and re-export restrictions may also become relevant. Finally, projects involving NATO or EU classification information require appropriate facility security clearances and security agreements, including obligations that extend throughout the subcontractor chain.

Two examples illustrate how these issues may arise in practice.

A Polish SME has developed a high-resolution infrared sensor for drone detection and joins a consortium led by a major European systems integrator in order to participate in the European Drone Defence Initiative. The consortium agreement defines the allocation of workshare, such as the delivery of 500 sensor units per year and addresses IP rights, with background IP remaining with the SME and foreground IP being shared among the project participants. The agreement may also include liability caps not exceeding 150 % of the contract value, as well as export restrictions prohibiting re-export outside the participating states without the consent of all consortium members.

A different scenario arises for a Romanian infrastructure and logistics company involved in the development of military mobility corridors under Eastern Flank Watch. The dual-use infrastructure, including roads, bridges and logistics hubs, must satisfy both civil and military requirements. The contractual framework will typically consist of a framework agreement with the national procurement authority, call-off arrangements under the joint EU procurement mechanism and strict confidentiality obligations relating to classified planning information. In its consortium agreement with the lead systems integrator, the company will also need to agree liability provisions for delays, establishing change control procedures governing amendments to project specifications and ensure that its subcontractors comply with applicable EU security requirements.

6. Compliance: export control, security and cyber security

Compliance is a recurring theme throughout the report. In relation to export control, the report calls for a coordinated, risk-based approach to products developed under flagship projects. Sensitive military technologies and dual-use items, particularly in the fields of space, quantum technologies and artificial intelligence, should not be transferred to hostile states or systemic rivals. In addition to the EU Dual-Use Regulation, national rules remain relevant. In Austria, for example, the War Material Act (Kriegsmaterialgesetz, KMG) and the associated War Material Ordinance require authorisation for the import, export and transit of war material.

Directive 2009/43/EC facilitates transfers of defence-related products within the EU, but it does not eliminate the practical need for national licences and supporting documentation. Companies participating in cross-border consortia should therefore assess at an early stage which authorisations may be required for the transfer of technology, components and materials. The time required to obtain such authorisations is often underestimated. Delays in approval procedures can have significant contractual consequences, ranging from claims for delay-related losses to contractual penalties.

The report also identifies cyber security and resilience as cross-cutting objectives of all flagship projects. These objectives encompass secure digital infrastructure, the protection of command-and-control systems and the integrity of data chains. This implications for suppliers are direct. Companies throughout the supply chain, including SMEs, will need to implement appropriate cyber security measures and controls.

A further consideration relates to AI in the defence sector. The AI Regulation excludes AI systems developed exclusively for military and national security purposes from its scope. Nonetheless, the report advocates ethical guidelines for defence-related AI that are consistent with international humanitarian law. Organisations developing AI components for flagship projects should therefore adopt a dual compliance approach: the AI Regulation will continue to apply to civilian applications, while separate defence-specific requirements may apply to purely military systems.

7. The CEE/SEE and international perspective

For companies in Central, Eastern and South-Eastern Europe, the defence flagship projects present a significant opportunity. Many companies in the region are located close to the capability gaps addressed by Eastern Flank Watch giving them practical advantages based on geographic proximity, local expertise, established infrastructure and shorter supply chains. The report also expressly encourages the participation of Member States with developing defence industries. Poland, the Czech Republic, Romania and the Baltic states, among others, have invested heavily in strengthening their defence capabilities in recent years. For Eastern and South-Eastern Europe in particular, the report highlights the importance of mobility corridors and dual-use infrastructure. This creates opportunities for regional construction, engineering and logistics providers whose capabilities are integral to the delivery of such projects. The report further emphasises the importance of regional spillover effects. Flagship projects are expected to support the creation of skilled jobs, facilitate technology transfer and contribute to economic cohesion across the European Union.

Five recommendations for decision-makers

• Build consortium partnerships with leading EU defence companies at an early stage and make use of existing PESCO and EDF networks.
• Establish compliance frameworks for export control and the handling of classified information proactively, as these are likely to be prerequisites for participation in EDPCIs.
• Develop a clear IP strategy, including the treatment of background IP and the allocation of rights in foreground IP.
• Implement robust cyber security standards throughout the supply chain, recognising that vulnerabilities at subcontractor level can affect the eligibility of the entire consortium.
• Closely monitor the development of the EDPCI implementing acts (COM(2026) 358 final) and the detailed structure of SAFE funding mechanisms.

The coming months are likely to be decisive. Following the Commission’s submission of its EDPCIs proposal in July 2026, implementation is beginning to take concrete shape. Companies that establish their market position, compliance structures and consortium strategy at an early stage will be best placed to participate in the substantial investment expected to accompany these initiatives.