EDIP Regulation: A New European Framework for Defence Industrial Sovereignty

Any perception of excessive interference by the Commission naturally raises concerns within the European Parliament. Accordingly, in line with previous instruments (European Defence Fund – EDF, EDIRPA), the implementation of EDIP will primarily rely on the initiative of the Member States. The Commission will mainly act as an intermediary and coordinator.

The regulation is designed above all to establish a catalogue of tools and to offer Member States the possibility to adapt their national defence equipment procurement schemes so as to make them compatible with the Regulation and, in doing so, benefit from EU funding.

It remains possible to design new mechanisms inspired by the various instruments proposed under EDIP. However, defence sector stakeholders should bear in mind that—unless extended, which is not envisaged at this stage—the regulation will only apply until December 2027. This relatively short timeframe appears intentional, as the Commission seeks primarily to stimulate a European dynamic in the short and medium term.

Such a dynamic requires swift mobilisation of stakeholders, particularly industry players, to seize co-financing opportunities and promptly engage in dialogue with the relevant national and international institutions.

Finally, it should be noted that Article 3 of the regulation provides that a programme launched before EDIP expires may continue to benefit from EU budget funding until 2033. This provision enables Member States to offset the brevity of the regulation’s application period and, in doing so, demonstrate a degree of ambition.

The EDIP Regulation establishes an innovative common procurement logic between Member States, associated countries and Ukraine. This cooperation takes place through consortia or dedicated structures, referred to as SEAPs (see Title 2 of this article). The procedure, strictly framed by Article 11, requires the participation of at least three entities from three Member States or associated countries, including two contracting authorities from two different Member States. A procurement agent is appointed unanimously to steer the procedure and sign the contracts on behalf of the participants. The practical arrangements-choice of procedure, evaluation of tenders and contract award-are defined by an agreement between the parties.

The European Commission may also act as a central purchasing body (Article 15), set up a joint negotiation team and, in cases of extreme urgency, request delivery of defence products as from the date on which the draft contracts are sent, even before formal signature (Article 15(7)). The Regulation also introduces the possibility of concluding advance purchasing agreements (Article 16). These agreements, negotiated and concluded by the Commission on behalf of participating countries, may include an upfront payment to reserve production capacity, limited to non-recurrent costs.

Finally, the Commission facilitates agreements between Member States, associated countries (or Ukraine) and industry to support industrial ramp-up (Article 17).

The creation of Structures for European Armament Programme (SEAPs) is one of the Regulation’s major innovations (Articles 40 et seq.). These structures, endowed with legal personality, provide a framework to pool the development, procurement and life-cycle management of defence equipment. They can be established at the request of at least three members-including two Member States-following validation by the European Commission (Articles 41 and 42).

SEAPs enjoy remarkable autonomy: they define their own procurement rules, while complying with fundamental principles of public procurement law (equality of treatment, transparency, non-discrimination and proportionality). Their acquisitions are treated as contracts awarded by a government to another government, and thus fall outside the scope of Directive 2009/81/EC (Article 47). These structures benefit from significant advantages: VAT and excise duty exemptions; the ability to issue securities to finance their activities; and access to contributions from other EU programmes, subject to the absence of double funding (Articles 45 and 48).

Eligible for funding are: legal entities established in the EU or an associated country, whose executive management structures and infrastructures are also located in the EU or an associated country; consortia bringing together at least three entities from three Member States or associated countries for common procurement; SEAPs established by at least three members (including two Member States); and Ukraine and its industry, under specific conditions.

EDIP lays down several cumulative conditions. The cost of components originating outside the EU or associated countries must not exceed 35% of the estimated cost of the components of the end product (Article 10(3)). Beneficiaries must be able to decide freely on the definition, adaptation and evolution of product design, without restrictions imposed by non-associated third countries (Article 10(5)). A temporary derogation applies for ammunition and missiles until 2033, subject to a legally binding commitment to obtain the required decision-making autonomy within the prescribed timeframe. The Regulation also allows for the inclusion of extra-European subcontractors within a 15% to 35% band of contract value, provided that a direct contractual link has been established prior to the Regulation’s entry into force (Article 11(7)).

The EDIP Regulation identifies four main categories of actions, each benefiting from a specific funding rate and precise legal definition.

Actions for common procurement

These consist of joint purchases of defence products by several legal entities (Member States, associated countries, Ukraine, SEAPs, international organisations, the EDA), at any stage of the equipment life cycle, including the creation of industrial reserves (Article 11), as referred to in Title 1 of this article. Funding rate: up to 15% of the contract value (Article 20(4)); up to 25% if the action is carried out by a SEAP, fosters cross-border cooperation, supports Ukraine or Moldova, involves broad supplier distribution, or concerns high-value investments (Article 20(5)).

Industrial reinforcement actions

These include activities aimed at accelerating the adaptation of production capacities for defence products, their components and raw materials. This encompasses optimisation, modernisation, new capacities, reserved capacities, cross-border industrial partnerships, support for industrialisation and commercialisation, as well as testing and certification (Article 12). Funding rate: up to 35% of eligible costs (Article 20(6)), rising to up to 50% if most beneficiaries are SMEs or mid-caps, or if the action is carried out by a SEAP and creates new cross-border cooperation, new infrastructure or production capacities (Article 20(7)).

Supporting actions

These include activities to increase interoperability and interchangeability (cross-certification, NATO standards, etc.), facilitate market access for SMEs/mid-caps/start-ups, build capacity and training, support the creation and functioning of SEAPs, remove bottlenecks in supply chains, adapt civil products for defence, or support innovation (Article 13). Funding rate: up to 100% of eligible costs (Article 20(1)).

Cross-border cooperation

This covers any action involving legal entities established in at least two different Member States, aimed at strengthening industrial resilience, pooling capacities and promoting the circulation of defence products, components and raw materials at European level (Articles 12, 18 and 20). Industrial reinforcement or common procurement actions which incorporate cross-border cooperation may benefit from increased rates (up to 25% for common procurement; up to 50% for industrial reinforcement), subject to the conditions set out in Article 20(5) and (7).

Integration of European Defence Projects of Common Interest (EDPCIs)

Among the eligible actions for EU funding under the Regulation, the deployment EDPCI occupies a central place (see Recital 47 and Article 10(1)(d)). EDPCIs are large-scale, collaborative industrial projects identified by the Council, on a proposal from the Commission, as being of strategic importance for the Union’s defence and security. To qualify, these projects must involve at least four Member States, align with EU capability priorities, and foster cross-border cooperation, interoperability, and reduced strategic dependencies.

Eligible activities include joint procurement, industrial capacity upgrades, the development of new defence products, and related infrastructure. The Regulation allows EU funding to cover up to 100% of eligible costs for EDPCIs, and the construction of facilities linked to these projects may be treated as an overriding public interest to accelerate permitting.

Award criteria

Award criteria include, inter alia, contributions to competitiveness, resilience, geographical distribution of capacities, interoperability, interchangeability and reduction of strategic dependencies, as well as SME and mid-cap participation, reduced delivery times, increased production capacities and cross-border industrial cooperation (Article 18).

Form of the grant

Grants shall be awarded directly by the Union from the Union budget.

Fund Accelerating Defence Supply Chains Transformation

The Regulation also establishes the Fund Accelerating Defence Supply Chains Transformation (FAST) to support investments by SMEs and mid-caps using blended financial instruments (loans, equity and guarantees) (Article 14).

For the first time at EU level, EDIP establishes a genuine security of supply regime for the defence sector, designed to anticipate, prevent and manage crises liable to disrupt the availability of essential defence products, relying on robust legal and operational tools (Articles 52 et seq.).

Key levers in crisis situations include:

• Facilitated modification of framework agreements: it becomes possible to add new contracting authorities to an existing framework agreement or to increase quantities up to 100% of the initial value, subject to the contractor’s agreement (Article 52).
• Direct award of contracts in strictly framed circumstances to guarantee convergence of military capabilities and the swift availability of equipment (Article 53).
• Activation of emergency measures (Articles 60 to 71) provides, inter alia, for the prioritisation of orders to respond to exceptional demand or critical shortages; the acceleration of intra-EU transfer procedures to ensure rapid circulation of strategic products and components; mutual recognition of certification of defence products; and support for innovation and industrial adaptation to shorten production timelines or rapidly replace critical components.
• A strengthened European governance accompanies these measures through a Defence Security of Supply Board (Article 76) composed of representatives of the Member States, the European Commission, the High Representative and the EDA. On paper, this original arrangement aims to guarantee the EU’s resilience, responsiveness and solidarity in the face of security challenges while ensuring the continuity of supply chains and the availability of defence equipment.

Ukraine holds a special place in EDIP as a strategic partner and beneficiary of a dedicated instrument of EUR 300 million (Article 22). The aim is to support the recovery and modernisation of the Ukrainian DTIB and facilitate its progressive integration into the EDTIB.

Ukraine may participate fully in common procurement procedures and European public procurement (Articles 28 and 30). It benefits from the same procedural safeguards and eligibility criteria as European entities, ensuring equal treatment and openness to all Member States. It can access funding for projects of modernisation, industrial scale-up and innovation in line with European standards and security requirements.

By thoroughly modernising defence public procurement in Europe, the EDIP Regulation marks a decisive step toward increased pooling of purchases and improved crisis responsiveness. This dynamic is accompanied by an industrial ramp-up while ensuring supply chain security and Ukraine’s integration as a strategic partner. In this new framework, the European Commission plays a central role as both central purchasing body and manager of the European Military Sales Catalogue, ensuring greater efficiency, enhanced transparency and strengthened industrial sovereignty for the Union.

To fully capitalise on these opportunities, industry must pay close attention to the localisation of activities, the robustness of their supply chains-particularly compliance with the 35% threshold for non-EU components-and the absence of third-country restrictions on product design or evolution. Finally, it should be stressed that SMEs and mid-caps benefit from enhanced support, in particular through the FAST facility, improving their access to funding and integration into European value chains, thereby contributing to the resilience and competitiveness of the defence sector.