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 that enables 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. Implementing decisions followed on 11 February 2026. The total 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 then award public contracts to companies. Access to these contracts is subject to strict eligibility criteria. Article 16 sets out a core principle: contractors and subcontractors must be established in the EU, an EEA-EFTA state or Ukraine. They must have their executive management located in these jurisdictions and must not be controlled by a third country.
A derogation is possible where such entities have been screened under Regulation (EU) 2019/452 on foreign direct investment and are subject to mitigating measures, or where they provide guarantees verified by their Member State of establishment that EU security and defence interests will not be adversely affected.
The essential means required to perform the contract, including production, logistics and governance, must also be located in these territories. An exception applies where such means are not readily available within the Union, subject to Commission oversight.
SAFE prioritises contracts involving at least two Member States. It also allows, on a transitional basis, purely national contracts concluded before 30 May 2026, with the possibility of extension. The Regulation incorporates security and defence partnerships and facilitates joint procurement with partners such as Canada and the United Kingdom. It also presumes urgency under Directive 2009/81/EC, allowing the use of the negotiated procedure without prior publication.
The ‘European preference’ is based on two mechanisms:
- 35% cap
The cost of components from third countries must not exceed 35% of the total estimated cost of the components of the final product. The Commission may clarify the calculation method. Any component that conflicts with the Union’s security interests is prohibited, regardless of this threshold. - Extra-EU subcontracting (15%–35%)
This is allowed on a transitional basis where a contractual relationship existed before 29 May 2025, or where the main contractor commits to assess within two years whether the third-country supplier can be replaced by an EU-based supplier.
In practice, SAFE reflects a model of shared strategic responsibility rather than full strategic autonomy. Existing technological dependencies, Member State priorities and coordination with NATO shape its scope. The instrument is therefore a lever for industrial and capability convergence. Its effectiveness will depend on coordinated and consistent implementation by Member States.
