AGEFI Luxembourg - septembre 2025

AGEFI Luxembourg 6 Septembre 2025 Economie I n June 2025, the European Commis- sion adopted the Defence Readi- ness Omnibus (the “Omnibus”), comprising a Communication (1) along- side legislative proposals and amend- ments to six existing EU legal acts impacting defence. Building on the Joint White Paper on European Defence Readiness 2030, this initiative responds to height- ened security threats and aims to ensure Europe achieves ro- bust defence posture by 2030. “ 2030 is tomorrow. So Europemust get ready today “. (2) This represents the culmination of the ReArm Europe Plan, launched inMarch2025 tomobiliseup to 800 billion € over four years. Defence and security: two intertwined concepts Defence and security, while distinct, are inherently interconnected. Defence readiness, on the one hand, refers to “the ability of Member States and Union defence industry to anticipate, prevent and respond to defence-related crises” (3) through available industrial capacity and infrastructure to respond effectively to crises and deter threats. (4) Security on the other hand encompasses broader strategic considerations. As the Communication notes, “[I]n today’s rapidly evolvingworld, our security landscape has changed. The threats we face are larger, more global, ranging frompowerful organised crime net- works and terrorism to hybrid threats fuelled with dis- information, fear and sabotage to our critical infrastructure, often by hostile foreign state actors” . (5) The Commission underscores that, “[o]ur security relies both on civilian and military preparedness” , (6) highlighting that security extends beyondmilitary measures, requiring an integrated approach. TheCommunicationpresents defence and security as mutually reinforcing components of European preparedness, the approach remaining defence- centric. Modernising EU defence procurement The Omnibus reforms the Defence and Sensitive Security Procurement Directive 2009/81/EC to sim- plify procedures and enableMember States to pri- oritise critical contracts. Key changes to be enacted by 2026 include higher procurement thresholds for supply and service contracts , raised from respectively 443,000 to 900,000 € (103% increase) and from 5,538,000 to 7,000,000 € (26% increase). Framework agreementmaximumterms extend from 7 to 10 years, with possible extensions beyond 10 years in specific circumstances considering equipment service life and technical supplier change difficulties. Newprocurement tools include open, re- stricted, and negotiated procedures with competitive dialogue or innovation partnerships, (7) plus fully electronic Dynamic Purchasing Systems for commonly used purchases. Cross-border procurement is strengthened, involving contract- ing authorities from different Member States, allowing them to act jointly, with temporary deroga- tions applying to common pro- curements until 2031 for common purchases by at least three Member States for identical or minimallymodified defence equipment to enhance interoperability. Supply chain requirements mandate that (sub)contractor infrastructure be located inMem- ber States or EEAEFTA States, with non-EU com- ponents limited to 35% of total cost. Streamlining intra-EU transfers of defence products The Commission proceeds by proposing amend- ments toDirective 2004/43/ECon intra-EUtransfers of defence-related products by expanded exemp- tions fromprior authorisations for EU-fundedde- fence projects , cross-border partnerships, and crisis emergencies, or extending general transfer li- cences to cover transfers by certified entities , not only certified defence undertakings, where Mem- ber States must certify reliable recipients, easing intra-EUtransfers andenablingnewlicences for de- fence projects, groups, and urgent cases situations. Changes also include new general transfer li- cences for EuropeanDefence Fund (EDF) projects covering all defence products and transfers, reduc- ing transfer times fromweeks to 1-3 days through ex-post control, encouraging Member States to avoid transfer limitations on components inte- grated into final products in anotherMember State that cannot be re-exported separately, applying the deminimis principlewhere appropriate , andgiving the Commission the authority to define the min- imumrequirements for national general transfer licences through delegated acts. The EDF and EU funding The Commission proposes amending Regulation (EU) 2021/697 setting up the EDF to increase flexi- bility and reduce administrative burdens in EDF implementation. TheCommissionproposes (i) simplified andmore targeted award criteria , faster assessments, and shorter timeframes for grant agreements and pay- ments , (ii) flexible management with an option for annual or multiannual work programmes, clearer rules on direct awards, and expanded use of indirect management (8) , (iii) a simplification of pre-commercial procurement rules , (9) clarified ac- cess rights for co-financingMember States, higher subcontracting limits, extended ownership control validity (18 to 36+months), and a standard non-re- transfer clause , and (iv) testing costs outside the EU, including in Ukraine, will be eligible for a rapid integration into defence R&D. The Commission will open additional EU funds to defence projects, adapting InvestEU eligibility criteria and opening the European Innovation Council “Accelerator, STEP, and the Scaleup Eu- rope Fund”, to dual-use anddefence technologies. For the EIB Group (10) , this means expanding de- fence-related funding, with annual investments doubled to € 2 billion, targeting drones, space, cy- bersecurity, quantum technologies, military facili- ties, and civil protection projects. The EIB also plans to refine its eligibility criteria to replace the ad hoc Strategic European Security Initiative with a dedicated policy goal for peace and security. This represents a policy shift for the EIB, which his- torically excluded the financing of ammunition, weapons, and military infrastructure. (11) Adressing regulatory bottlenecks: environment, chemicals, and product law EU environmental, chemical, and import rules slow defence projects with heavy authorisations. Fast-track permitting with single contact points could speed urgent needswhile preserving safety. Member States can use existing EU law defence derogations for public interest, safety, or crisis, for example under the Environmental ImpactAssess- ment Directive 2011/92/EC. The Commission also proposes broadening REACH exemptions for defence across the chemi- cals acquis (REACH, CLP, Biocidal Products, Per- sistent Organic Pollutants regulations) to meet the 2030 defence readiness goal, while encouraging Member States to fullyutilize availablederogations. Member States are encouraged to use import duty suspensions and tariff waivers, and to deploy reg- ulatory sandboxes forAI defence systems testing. EU competition law The defence sector faces distinct antitrust chal- lenges, with procurement still largely national and limited EU coordination, which underscores the need for stronger European coordination. (12) The Commission confirms EUcompetition rules apply to defence but should not hinder urgent capability scale-up or Member States’ ability to respond to geopolitical threats. Merger control For EUmerger control to ensure well-functioning defence markets, critical for delivering cutting- edge technology and ensuring sufficient produc- tion capacity, the Commission is reviewing its guidelines to issue specific guidance on defence- related mergers, particularly regarding efficiency claims, noting only that it will “ assess the overall ben- efits from enhanced defence and security ”. (13) This flex- ible approach was reflected in the unconditional approval of SES’s acquisition of Intelsat, both global GEO satellite operators. EU antitrust law TheCommissionwill provide guidance ondefence sector cooperation essential for scaling production and joint development, including joint procure- ment of rawmaterials. TheCommissionwill assess such agreements by weighing positive effects “ of such cooperation in terms of defence readiness, resilience of the defence supply chains and of the internal mar- ket ”, (14) which should remain open, competitive and integrated. This advocates for a “buy European” approach to defence procurement. EU state aid law TheCommission stresses the need to accelerate de- fence productionwhere privatemarkets cannot re- spond quickly enough. First, the Commission considers safeguarding es- sential security interests as not necessarily distort- ing competition. Certain public-remit activities (sovereign state functions) are not classifiedas State aid underArticle 107 TFEU, includingmilitary op- erations and general infrastructure investments. Second, not all State aid measures must be re- ported: (i)Article 346 (1)(b) TFEUallowsMember States to take measures necessary to protect essential secu- rity interests without being constrained by EU competition rules; (ii) where aiddoes not fall underArticle 346 TFEU, it may still be compatible under General Block Ex- emptionRegulation, orArticle 107(3)(c) TFEU, and (iii) State aid’s benefitswill beweighed against po- tential distortions, prioritising measures that sup- port Defence Readiness 2030, enhance security, and reduce reliance on third countries. Leveraging Public and Private Financing toMeet Strategic Objectives Strengthening Europe’s resilience and indepen- dence requires both public and private financing. Over half of Member States have triggered the national escape clause under the Stability and Growth Pact, temporarily increasing public de- fence spending while maintaining debt sustain- ability. (15) The Commission stresses that rebuilding Eu- rope’s defence requires massive investment from both public and private sources , (16) as already un- derlined in the Communication on the Savings and Investments Union, the White Paper on De- fence Readiness 2030 (“ White Paper ”) and the ReArm Europe Plan. Companies of the defence sector, including SMEs andMid-Caps “ must have better andmore flexible ac- cess to capital, including guarantee instruments for de- risking investments, to bring their solutions to industrial scale and to drive the industrial ramp-up that the Union requires” . (17) As such, developing liquid EU capital markets are a necessity to channel savings into strategic defence investments, and are no longer a ‘nice-to-have’, (18) with the defence sector remaining under-served: 44%of defence SMEs report financ- ing difficulties, while US investors still provide 60% of available capital. Clarifications under the Sustainable FinanceDisclosure Regulation (SFRD) could further facilitate defence financing. (19) Private financing is fundamental, because as com- panies “ grow, the limited availability of risk capital forces them to turn to foreign investors. This is wealth and jobs going elsewhere. And it jeopardises our tech sovereignty .” (20) Philippe-EmmanuelPARTSCH(portrait), Partner inEUFinancialCompetitionLawatArendt&MedernachS.A. ProfessorofEUBankingandFinancialLawattheUniversityofLiège Lecturer inEUBankingandFinancialLawatthe UniversityofParisIIPanthéon-Assas ElenaWEHLES, Associate inEUFinancialCompetitionLawatArendt&MedernachS.A. Commission Unveils Defence Readiness Omnibus: ANew Framework for Europe’s Defence by 2030 1) Communication from the Commission to the European Parliament and the Council Defence Readiness Omnibus, COM(2025) 820 final, 2) 2025 State of the Union Address by President von der Leyen, Strasbourg, 10 September 2025. 3) Communication from the Commission to the European Parliament and the Council Defence Readiness Omnibus, COM(2025) 820 final, page 1. 4) Ibid. 5) Ibid. 6) Ibid. 7) Innovation partnerships address needs for innovative products that cannot be met by existing market solutions. 8)IndirectmanagementasdefinedbyArticle62ofRegulation 2018/1046onthefinancialrulesapplicabletothegeneralbud- get of the Union (the “ Financial Regulation ”) – i.e a method of implementing the EU budget where the European Com- mission entrusts certain budget execution tasks to third par- ties, rather than carrying them out itself. These tasks may be delegated to third countries or bodies they designate, inter- national organisations, the EIB/EIF (individually or jointly), EU bodies, public law bodies (including those of Member States), private law bodies with a public service mission and sufficient financial guarantees, public-private partnerships, or specific bodies/persons implementing actions under the Common Foreign and Security Policy (CFSP). 9) Pre-commercial procurement, as defined in the PCP Communication, is a public procurement mechanism throughwhich public authorities commission research and development services—including solution design, proto- typing, and field testing—frommultiple competing suppli- ers. The objective is to stimulate innovation in response to public sector needs, while sharing risks and benefits with the supplier. 10)EuropeanInvestmentBank,AsannouncedintheWhitePaper for EuropeanDefence – Readiness 2030, https://lc.cx/kBrgBy 11) List of excluded financing, https://lc.cx/7qINA5 12) Statement of the German Monopolies Commission, https://lc.cx/rEG22A 13) Communication from the Commission to the European Parliament and the Council Defence Readiness Omnibus, COM(2025) 820 final, page 10 14) Ibid. 15) Ibid , page 2 16) Ibid , page 12 17) Ibid. 18) Communication from the Commission to the European Parliament,theEuropeanCouncil,theCouncil,theEuropean CentralBank,theEuropeanEconomicandSocialCommittee and the Committee of the Regions Savings and Investments Union A Strategy to Foster Citizens’ Wealth and Economic Competitiveness in the EU, COM/2025/124 final. 19) White Paper for European Defence – Readiness 2030, pages 15 to 17. 20) 2025 State of the Union Address by President von der Leyen, Strasbourg, 10 September 2025.