Complex public procurement opportunities on the horizon
Adopted by the Council of the European Union on 27 May 2025, Regulation (EU) 2025/1106, known as Security Action for Europe (SAFE), establishes a loan instrument enabling Member States to finance defence acquisitions and capability development programmes.
On 15 January 2026, an initial tranche of €38 billion was approved for eight Member States, followed by implementing decisions adopted on 11 February 2026. The overall envelope amounts to €150 billion, with Poland, France, Romania, Hungary and Italy expected to be among the main beneficiaries.
Loans are granted exclusively to Member States, which subsequently award public contracts to companies. Access to those contracts is subject to strict eligibility criteria. Article 16 of the SAFE Regulation sets out a core principle: contractors and subcontractors must be established in the European Union, an EEA-EFTA State or Ukraine, must have their executive management located there, and must not be controlled by a third country. A derogation is possible for such controlled entities if they have been screened under Regulation (EU) 2019/452 on foreign direct investment screening, together with mitigating measures, or if they provide guarantees, verified by their Member State of establishment, demonstrating that the Union’s security and defence interests will not be adversely affected. The essential means required for performance of the contract (including production, logistics and governance functions) must also be located in those territories, unless such means are not “readily available” within the Union — a notion that remains subject to Commission oversight.
SAFE prioritises contracts involving at least two Member States, while allowing, on a transitional basis, strictly national contracts concluded before 30 May 2026, subject to subsequent extension. The Regulation also incorporates security and defence partnerships, facilitating joint procurement notably with Canada and the United Kingdom, and presumes the existence of urgency within the meaning of Directive 2009/81/EC, thereby permitting the negotiated procedure without prior publication.
The “European preference” rests on two mechanisms:
- 35% cap: the cost of components originating in third countries may not exceed 35% of the total estimated cost of the components of the final product (rather than of the total contract value). The Commission may clarify the method of calculation. Any component considered contrary to the Union’s security interests is prohibited, irrespective of that threshold.
- Extra-EU subcontracting (15%–35%): this is permitted on a transitional basis where a contractual relationship existed before 29 May 2025, or where the main contractor undertakes to assess, within two years, the feasibility of replacing the third-country supplier with a supplier established in the Union.
In practice, SAFE reflects less a model of absolute strategic autonomy than one of shared strategic responsibility: persistent technological dependencies, the primacy of Member States’ sovereign choices and coordination with NATO structurally shape its ambition. The instrument thus appears to be a lever for industrial and capability convergence, whose effectiveness will depend on the coordinated and consistent use made of it by Member States.
