Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on establishing the Act in Support of Ammunition Production
Date: 2023-05-03
Institutions: Directorate-General for Defence Industry and Space, European Commission
Subjects: EU aid, EU financial instrument, EU production, European arms policy, European defence policy, arms industry, arms supply, common security and defence policy, firearms and munitions, security of supply

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   EUROPEAN COMMISSION  Brussels, 3.5.2023  COM(2023) 237 final 2023/0140 (COD)  Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on establishing the Act in Support of Ammunition Production  
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

Russia’s  military  aggression  against  Ukraine  has  marked  the  dramatic  return  of  territorial 
conflict and high-intensity warfare on European soil. European Union Member States’ armed 
forces  have  been  tailored  during  the  last  decades  to  perform  expeditionary,  peace-keeping 
and/or peace enforcement missions, and the planning and procurement of defence systems has 
been tailored according to this operational reality.  

The production capacity of the European Defence Technological and Industrial Base (EDTIB) 
has  been  therefore  tailored  to  respond  primarily  to  limited  Member  States’  needs,  mostly 
along national dividing lines, due to decades of public underinvestment.  

In such a scenario, defence companies often faced the need to reduce production rates in order 
to  keep  production  lines  afloat  and  maintain  skilled  personnel,  while  producing  limited 
quantity of defence systems for national customers.  

The return of a high intensity conflict scenario reverses the market context described above. 
As  pointed  out  by  the  Joint  Communication  on Defence  Investment  Gaps  analysis  and  way 
forward  (JOIN/2022/24  final)  underinvestment  resulted  into  both  capability  and  industrial 
gaps  within  the  Union.  In  July  2022  the  Commission  presented  the  proposal  of  European 
Defence  Industrial  Reinforcement  through  common  Procurement  Act  (EDIRPA),  aimed  at 
supporting  collaboration  between  Member  States  in  the  procurement  phase  to  fill  the  most 
urgent  and  critical  gaps,  especially  those  created  by  the  response  to  the  current  Russia’s 
aggression,  in  a  collaborative  way.  EDIRPA  will  contribute  to  reinforce  common  defence 
procurement and, through the associated Union financing, to strengthen EU defence industrial 
capabilities  and  the  adaptation  of  Union’s  defence  industry  to  structural  market  changes 
resulting increased demand due to the return of high intensity warfare.  

Capability gaps are various, but in light of the situation in Ukraine, there is a specific pressing 
need  for  ground-to-ground  ammunition  and  artillery  ammunition,  as  well  as  missiles  as 
recognised  by  the  Council  who  agreed  on  20  March  2023  on  a  three-track  approach.  The 
Council agreed to urgently deliver ground-to-ground and artillery ammunition to Ukraine and, 
if  requested,  missiles  and  called  on  Member  States  to  jointly  procure  ammunition  and  if 
requested missiles, to refill their stocks while enabling the continuation of support to Ukraine. 
As  joint  efforts  to  enable  Member  States  to  replenish  their  depleted  stocks  and  to  support 
Ukraine can only be effective if the EU supply side can deliver on time the required defence 
products,  the  Council  tasked  the  Commission  to  present  concrete  proposals  to  urgently 
support  the  ramp-up  of  manufacturing  capacities  of  the  European  defence  industry,  secure 
supply  chains,  facilitate  efficient  procurement  procedures,  address  shortfalls  in  production 
capacities  and  promote  investments,  including,  where  appropriate,  mobilising  the  Union 
budget.  

The  Defence  Joint  Procurement  Task  Force  has  initiated  the  mapping  of  the  EU  industry’s 
manufacturing capacities, including in the area of ground-to-ground and artillery ammunition, 
as well as  missiles (‘relevant  defence products’). However, production capacities within the 
Union’s  defence  industry  sector  have  been  tailored  for  peace  time  while  European  defence 
companies face a surge in demand in the area of relevant defence products, requiring them to 
produce more and faster. This discrepancy between an urgent armed forces’ need and existing 

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limited production capacity results into price inflation and a difficulty to serve customers, and 
risks generating  a security of supply issue  for Member States’  Armed  Forces  and therefore, 
potentially harming the security of EU citizens. This does not only apply to prime contractors 
but also across the whole supply chain, which is, for relevant defence products, widely spread 
throughout the Union and composed of several SMEs and Mid-Caps.  

While Member States need to ensure firm orders to the EDTIB, defence industrial ramp up is 
a process requiring time and efforts in several areas (human resources, machine tools, supply 
chain management, securisation of raw materials). While firm orders from Member States are 
a  precondition  for  any  investment  by  industry,  the  Commission  can  intervene  by  de-risking 
industrial investments via grants and loans allowing a faster adaptation to ongoing structural 
market  change  and  removing  existing  bottlenecks,  allowing  industry  to  produce  more  and 
faster along the value chain.  

On  top  of  industrial  reinforcement,  additional  measures  are  needed  to  ensure  the  correct 
functioning  of  the  internal  market  in  the  relevant  defence  products  areas,  in  line  with 
provisions  of  article  114  TFEU.  Firm  orders  by  Member  States  authorities  will  face  as  an 
obstacle  the  existing  limited  manufacturing  capacity,  raw  materials,  skilled  personnel.  To 
ensure  the  increased  volume  and  speed  of  production,  the  Commission  may  need  the 
possibility, in agreement with the Member States concerned, to invite legal entities to accept 
and prioritise orders for the production or supply of the relevant defence products. This will 
ensure that limited existing production capacities are used for the benefit of political goals set 
by  the  Council.  Along  the  same  lines,  regulatory  simplification  will  allow  to  temporarily 
derogate  from  existing  regulations  and  directive  with  the  objective  to  speed  up  production. 
The  Act  foresees  in  particular  a  derogation  from  Directive  2009/81/EC  of  the  European 
Parliament and the Council1, to allow the possibility to open up national framework contracts 
to other Member States without organising a new tender in view of the extreme urgency of the 
situation  and  where  the  flexibilities  offered  by  Directive  2009/81/EC  of  the  European 
Parliament and the Council are not sufficient to ensure the security interests of Member States 
willing  to  engage  in  common  procurement.  This  derogation  shall  be  accompanied  by  the 
possibility  for  any  economic  operator  that  meets  the  initial  requirements  of  the  framework 
agreements to join the framework agreement. The framework agreement shall remain subject 
to the principles of transparency and non-discrimination. 

Similarly, and in order to speed up intra-EU transfers of ammunition and missiles, they shall 
be allowed to derogate from article 4(1) of Directive 2009/43/EC and not be subject to prior 
authorisation. 

In  order  to  be  competitive,  innovative  and  resilient,  as  well  as  to  be  able  to  ramp  up  its 
production  capacities,  the  EDTIB  needs  to  access  both  public  and  private  financing.  Facing 
important  financial  needs  to  increase  production  capacities,  defence  companies  might  need, 
on top of grants, debt solutions to bridge gaps between Ministries of defence orders and cash-
flow need. However, restrictive lending policies towards the defence industry sector hampers 
access to finance for defence companies in the EU.  

1 

Directive  2009/81/EC  of  the  European  Parliament  and  of  the  Council  of  13  July  2009  on  the 
coordination  of  procedures  for  the  award  of  certain  works  contracts,  supply  contracts  and  service 
contracts  by  contracting  authorities  or  entities  in  the  fields  of  defence  and  security,  and  amending 
Directives 2004/17/EC and 2004/18/EC (OJ L 216, 20.8.2009, p. 76–136). 

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Undertakings  in  the  value  chain  of  relevant  defence  products  shall  have  access  to  debt 
financing,  to  speed-up  investments  needed  to  increase  manufacturing  capacities.  The 
instrument will aim at facilitating access to finance for Union’s companies in the ammunition 
and missile field.  The Regulation should notably ensure that those legal  entities are  granted 
the same conditions offered to other legal entities, taking charge of any additional cost arising 
specifically  for  the  defence  The  Act  foresees  measures  to  facilitate  access  to  finance,  both 
with  a  specific  eligible  action,  as  well  as  under  a  Facility,  the  ‘Ramp-up  Fund’  proposing 
solutions,  to  leverage,  de-risk  and  speed-up  investments  needed  to  increase  manufacturing 
capacities.  The  Ramp-up  Fund  shall  be  implemented  in  direct  or  indirect  management  in 
accordance  with  the  Financial  Regulation.  The  Commission  will  explore  the  possibility  to 
establish a blending facility, including under InvestEU Fund established by Regulation (EU) 
2021/523 of the European Parliament and Council, in close cooperation with its implementing 
partners.   Administrative  applications  related  to  the  planning,  construction  and  operation  of 
production  facilities,  intra-EU  transfer  of  inputs  as  well  as  qualification  and  certification  of 
end products should also be treated in the fastest legally possible way. 

• 

Consistency with existing policy provisions in the policy area 

The Council of the European Union, on 20 March 2023 agreed on a  three-track approach to 
“speed  up  the  delivery  and  joint  procurement,  aiming  at  one  million  rounds  of  artillery 
ammunition  for  Ukraine  in  a  joint  effort  within  the  next  twelve  months”.  It  also  called 
“Member States to jointly procure 155mm ammunition and, if requested, missiles for Ukraine 
in  the  fastest  way  possible  before  30  September  2023  from  the  European  defence  industry 
(and  Norway)  within  the  parameters  defined  in  the  context  of  an  existing  EDA  project  or 
through complementary joint acquisition projects led by a Member State”. Finally, it invited 
the  Commission  to  “present  concrete  proposals  to  urgently  support  the  ramp-up  of 
manufacturing  capacities  of  the  European  defence  industry,  secure  supply  chains,  facilitate 
efficient  procurement  procedures,  address  shortfalls  in  production  capacities  and  promote 
investments, including, where appropriate, mobilising the Union budget.  

The  Council  also  stated  that  “regular  meetings  at  the  level  of  the  National  Armament 
Directors  with  the  Defence  Joint  Procurement  Task  Force  (Commission,  EEAS,  EDA)  will 
also be organised, to assess the needs and the industrial capabilities as well as to ensure the 
necessary  close  coordination,  especially  regarding 
the 
reprioritisation  of  existing  orders  and  the  different  joint  acquisition  projects,  to  ensure  an 
adequate implementation of the three different tracks”.  

the  provision  from  stocks, 

On 23 March 2023 the European Council reaffirmed that the “European Union stands firmly 
and  fully  with  Ukraine  and  will  continue  to  provide  strong  political,  economic,  military, 
financial  and  humanitarian  support  to  Ukraine  and  its  people  for  as  long  as  it  takes”.  The 
European  Council  welcomed  the  “agreement  in  the  Council  to  urgently  deliver  ground-to-
ground  and  artillery  ammunition  to  Ukraine  and,  if  requested,  missiles,  including  through 
joint procurement and the mobilisation of appropriate funding including through the European 
Peace Facility, aiming at providing 1 million rounds of artillery ammunition in a joint effort 
within the next twelve months”.  

The Act  in  Support  of Ammunition Production will also  be complementary  to  the proposed 
European Defence Industry Reinforcement through common Procurement Act (EDIRPA) and 
will pave the way for the future European Defence Investment Programme (EDIP).  

EDIRPA  incentivises  cooperation  in  the  procurement  phase,  benefitting  Member  States 
commonly procuring the most urgent and critical defence items, offering therefore increased 

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visibility  to  defence  manufacturers  to  help  them  adapt  to  structural  changes.  The  current 
supply crisis in the field of ammunition requires additional action targeting the supply side for 
relevant  defence  products.  The  Act  in  Support  of  Ammunition  Production  will  therefore 
accompany,  incentivise,  speed  up  and  simplify  the  needed  ramp  up  for  relevant  defence 
products. 

• 

Consistency with other Union policies 

The Instrument will complement existing collaborative EU defence initiatives. It will generate 
synergies  with  the  implementation  of  the  Strategic  Compass  for  Security  and  Defence,  and 
other  EU  programmes,  such  as  the  European  Defence  Fund.  The  Instrument  will  also  be 
implemented in full consistency with the EU capability development plan (CDP) identifying 
the defence capability priorities at EU level, as well as with the EU coordinated annual review 
on defence (CARD), which inter alia identifies new opportunities for defence cooperation. In 
this context, account may also be taken of relevant activities carried out by the North Atlantic 
Treaty  Organisation  (NATO)  and  other  partners  where  they  serve  the  Union's  security  and 
defence interests and do not exclude any Member State from participating.  

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

This Regulation aims at strengthening the responsiveness and ability of the EDTIB to ensure 
the timely availability and supply of relevant defence products in the Union. To this end, the 
regulation lays down a framework for implementing a series of specific and targeted measures 
to  speed  up  the  industry  adjustment  to  structural  changes.  This  framework  is  based  on  2 
pillars, each corresponding to one of the legal bases of this Regulation.  

 

 

The  first  pillar  is  composed  of  measures  to  support  the  industrial  reinforcement 
throughout the supply chains related to the production of relevant defence products 
in the EU and is based on Article 173(3) of the Treaty on the Functionning of the EU 
(TFEU). 

the  competitiveness  and 

The  Union’s  defence  industry  involved  in  the  production  of  relevant  defence 
products is currently facing a sudden surge of demand and urgently needs to adapt to 
this  new  market  situation.  The  EU  financial  support  under  this  pillar  will  aim  at 
the  European  Defence 
reinforcing 
Technological and Industrial Base (EDTIB) in the field of relevant defence products, 
to allow its urgent adaptation to structural change in accordance with the first indent 
of Article 173(1) of the TFEU. Thereby, this pillar supports EU industry to increase 
its  volume  of  production,  reduce  its  delivery  lead-time  and  address  potential 
bottlenecks  and/or  factors  that  could  delay  or  impede  the  supply  and  production  of 
relevant defence products. 

resilience  of 

In line with Article 173(3) of the TFEU, this pillar excludes any harmonisation of the 
laws  and  regulation  of  the  Member  States.  The  second  pillar  is  composed  of 
harmonisation measures to identify, map and continuously monitor the availability of 
the  relevant  defence  products,  their  components  and  the  corresponding  inputs,  and 
measures to establish requirements to secure the timely and lasting availability of the 
relevant defence products in the Union and is based on Article 114 TFEU. 

Ensuring  the  security  of  the  territory  of  the  Union  constitutes  an  overriding  public 
policy objective and this security depends also on the availability of defence goods 
and  services  in  sufficient  quantities.  The  current  geopolitical  context  results  into  a 

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significant increase of the demand for relevant defence products in the Union. This 
situation  affects  the  functioning  of  internal  market  for  these  products  and  of  their 
components  and  threatens  their  security  of  supply.  Member  States  have  taken 
measures  or  are  likely  to  take  measures  to  preserve  their  own  stocks  of  these 
products  and  of  their  components  as  a  matter  of  national  defence.  However, 
divergent  national  legislation,  in  particular  regarding  the  certification  of  defence 
products, intra-EU transfer of products and related components as well as divergent 
implementation  of  Union  law  have  proven  to  become  bottlenecks  for  European 
relevant defence products supply chains and obstacles to interoperability. As a result, 
it  is  necessary  to  adopt  Union-harmonising  legislation  based  on  Article  114  of  the 
TFEU  to  ensuring  the  functioning  of  the  internal  market,  by  avoiding  shortages  of 
relevant  defence  products  in  the  Union.  These  measures  should  consist  in  the 
identification of ‘supply-critical defence products’, the mapping of related industrial 
capacities,  priority  rated  orders,  acceleration  of  grant-permitting  procedures  or 
facilitation  of  procurement  procedures.  The  combination  of  these  measures  should 
have  the  result  of  making  available  an  increased  offer  in  relevant  defence  products 
and of their components in all Member States which are needed for the functioning 
of the internal market and should also converge to ensure the timely availability and 
supply of relevant defence products in the Union. 

Other  articles  of  the  TFEU  or  each  article  on  its  own  cannot  justify  both  of  the  above 
objectives.  The  proposed  elements  are  provided  in  one  act,  as  all  the  measures  constitute  a 
coherent  approach  to  address,  in  different  ways,  the  need  for  strengthening  of  the  Union’s 
defence ecosystem. 

• 

Subsidiarity (for non-exclusive competence)  

Providing  a  comprehensive  response  to  the  sudden  increase  of  relevant  defence  products 
demand requires a rapid and coordinated action at European level as no single Member State 
is capable of achieving this alone. Member States individually cannot effectively address the 
risk  of  significant  supply  disruptions  of  such  defence  products  which  are  due  to  a 
disequilibrium of the offer and the demand in the Internal market. Uncoordinated approaches 
would  entail  the  risk  of  worsening  the  effect  of  the  supply  crisis  by  encouraging  price-
spiralling  and  crowding-out  effects  for  these  defence  products.  Moreover,  considering  the 
existing production capacities of relevant defence products in the Union, the consequences of 
the Union’s supply shortages are so far-reaching that intervention at the level of the Union is 
best placed to address such issues.  

Therefore, Union action is needed in relation to the areas that this proposal addresses through 
its 2 pillars.  

 

With regard to the first pillar, the measures proposed aim at accelerating investments 
in  relevant  defence  products  manufacturing  capacities  in  the  Union,  while 
encouraging the EDTIB’s resilience through cross-border industrial partnerships and 
collaboration  of  relevant  companies  in  a  joint  industry  effort  to  avoid  worsening 
fragmentation  of  the  supply  chains.  Financial  support  and  incentives  can  only  be 
adequately  designed  and  implemented  at  Union  level  given  the  need  to  adjust  the 
EDTIB to  structural  changes.  It  is  important  to  underline that defence producers of 
relevant defence products are widely spread throughout the Union and composed by 
several SMEs and Mid-Caps. 

 

Regarding  the  second  pillar,  the  measures  foreseen  under  it,  will  serve  the  internal 
market,  strengthen  the  resilience  of  the  EDTIB,  and  guarantee  security  of  supply. 

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The  measures  aimed  at  identifying,  mapping  and  continuously  monitoring  the 
availability of the relevant defence products, their components and the corresponding 
inputs in the Union, will ensure the necessary intelligence gathering at Union Level 
and enable the Commission and Member States to anticipate shortages affecting the 
security  of  supply  of  such  defence  products.  The  measures  aimed  at  establishing 
requirements  to  secure  the  timely  and  lasting  availability  of  the  relevant  defence 
products,  will  enable  Member  States  and  Commission  to  address  the  shortages and 
bottlenecks in the supply chains in a more effective way than through a patchwork of 
national measures. 

• 

Proportionality 

In  view  of  the  unprecedented  geopolitical  situation  and  the  significant  threat  for  security  of 
the  Union,  there  is  a  clear  need  for  a  coordinated  action  at  EU  level.  The  proposed  policy 
approach is  proportionate to  the scale and  gravity  of the problems  that have been identified 
i.e.,  need  to  ensure  the  timely  delivery  of  some  of  the  defence  products  that  are  urgently 
needed  by  Member  States.  The  measures  set  out  in  the  proposal  do  not  go  beyond  what  is 
necessary  to  achieve  their  objectives,  are  proportionate  to  those  objectives  and  respect  the 
limits of possible Union intervention under the Treaties. They will need to be implemented in 
accordance  with  the  principle  of  proportionality,  including,  in  the  context  of  limitation  to 
fundamental rights in accordance with Article 52(1) of the Charter of fundamental rights. 

• 

Choice of the instrument 

The Commission proposes a Regulation of the European Parliament and of the Council. This 
is  the  most  suitable  legal  instrument  as  only  a  Regulation,  with  its  directly  applicable  legal 
provisions, can provide the necessary degree of uniformity needed for the establishment and 
operation of a Union Instrument aiming at promoting the reinforcement of an industrial sector 
across  Europe  and  ensuring  security  of  supply  of  specific  products.  A  directly  applicable 
Regulation also allows to ensure that the proposed measures can be implemented at short term 
to address the needs which are outlined in the proposal. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Ex-post evaluations/fitness checks of existing legislation 

There  is  no  prior  existing  legislation  covering  or  pertaining  to  this  specific  action.  To  date, 
there was no other Union legislative initiatives in the area of defence to support the ramp up 
of  production  capacities,  reduce  delivery  lead  times  and  tackle  supply  shortages.  Therefore, 
there is no previous ex-post evaluation or fitness check of existing legislation that took place 
for this legislative initiative. 

• 

Stakeholder consultations 

Due to the politically sensitive nature of the proposal and urgency to prepare the proposal so 
that it can be adopted on time by the  co-legislators, a stakeholder  consultation  could  not  be 
carried out. 

• 

Impact assessment 

Due to the urgency to increase production capacities of relevant defence products and ensure 
their  security  of  supply,  this  proposal  is  not  accompanied  by  a  formal  impact  assessment. 
Such document could not have been delivered in the timeframe available prior to the adoption 
of the proposal. The proposal draws on the lessons learned from the Joint Communication on 

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the  Defence  investment  gaps  analysis  and  way  forward  of  18  May  2022  and  builds  on  the 
work undertaken in the framework of the Defence Joint Procurement Task Force, established 
immediately  after  the  publication  of  the  above-  mentioned  Joint  Communication.  The 
Commission tables this proposal for a Regulation without including an impact assessment, in 
order to allow its swift implementation no later than 26 April 2023. The proposal is limited in 
time  and  contains  a  provision  requiring  the  Commission  to  draw  up  a  report  on  the 
implementation of this Regulation. 

• 

Regulatory fitness and simplification 

The Instrument is not expected to increase the administrative burden. 

• 

Fundamental rights 

Ensuring the security of EU citizens is an objective of general interest which can contribute to 
safeguarding  their  fundamental  rights  to  life  in  accordance  to  Article  2  of  the  Charter  of 
Fundamental  Rights  of  the  European  Union  (‘the  Charter’)  and  to  liberty  and  security  in 
accordance with Article 6 of the Charter. 

On the other hand, Article 16 of the Charter provides for the freedom to conduct a business 
and Article 17 of the Charter on the right of property.  

Some measures under pillar 2 are needed to address serious disruptions affecting the relevant 
defence  products  supply  in  the  Union  and  may  temporarily  limit  the  freedom  to  conduct  a 
business  and  the  freedom  of  contract,  protected  by  Article  16  and  the  right  to  property, 
protected by Article 17 of the Charter. Any limitation of those rights in this proposal will, in 
accordance with Article 52(1) of the Charter, be provided for by law, respect the essence of 
those  rights  and  freedoms,  genuinely  meet  objective  of  public  interest  of  security  and  will 
comply with the principle of proportionality. 

The  obligation  to  disclose  specific  information  to  the  Commission,  provided  that  certain 
conditions are met, respects the essence of and will not disproportionately affect the freedom 
to conduct a business (Article 16 of the Charter). Any information request serves the objective 
of general interest of the Union to enable the identification of potential mitigation measures to 
shortages affecting relevant defence products which are essential to ensure the security of the 
Union  and  its  member  States.  These  information  requests  are  appropriate  and  effective  to 
attain  the  objective  by  providing  information  necessary  to  assess  the  crisis  at  hand.  The 
Commission  in  principle  only  requests  the  desired  information  from  representative 
organisations  and  may  issue  requests  to  individual  undertakings  only  if  it  is  necessary  in 
addition. Since information on the supply situation is not available otherwise, there is not any 
equally  effective  measure  to  attain  the  information  necessary  to  enable  European  decision-
makers to take mitigation action. In light of the serious geopolitical and security consequences 
of relevant defence products shortages and the respective importance of mitigation measures, 
information  requests are proportionate to  the desired aim. Furthermore, the limitation  to  the 
freedom to conduct a business and the right to property are offset by appropriate safeguards. 
Any request to information may only be launched for products necessary to the production of 
relevant  defence  products  and  specifically  identified,  by  the  Commission  and  through  an 
implementing act, as affected by a supply crisis. 

The  obligation  to  accept  and  prioritise  priority  rated  orders  respects  the  essence  of  and  will 
not  disproportionately affect  the freedom  to  conduct  a business  and the freedom  of contract 
(Article 16 of the Charter) and the right to property (Article 17 of the Charter). This obligation 

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serves  the  objective  of  general  interest  of  the  Union  of  security  by  addressing  the  relevant 
defence products supply disruptions. The obligation is appropriate and effective to attain this 
objective by ensuring the available resources are preferentially utilised for production of such 
relevant defence products. There is no equally effective measure. When it comes to products 
identified  as  affected  by  a  supply  crisis  which  threatens  the  above-mentioned  objectives  of 
general interest and fundamental right, it is proportionate to oblige undertakings contracted in 
the context  of a joint  procurement of Member States or undertakings  which  are involved in 
the  supply  chain  of  the  latter  to  accept  and  prioritise  certain  orders.  Appropriate  safeguards 
ensure that  any negative impact  of the prioritisation  obligation on the  freedom  to  conduct  a 
business, the freedom of contract and the right to property does not amount to a violation of 
these  rights.  Any  obligation  to  prioritise  certain  orders  may  only  be  launched  for  products 
identified by the Commission and through an implementing act as affected by a supply crisis. 
The undertaking concerned may request the Commission to review the priority rated order if 
it is unable to perform the order or performing the order would place unreasonable economic 
burden  on  them  and  entail  particular  hardship.  Furthermore,  the  subject  of  the  obligation  is 
exempt  from  any  liability  for  damages  for  the  violation  of  contractual  obligations  resulting 
from  compliance  with  the  obligation.  Finally,  this  Regulation  will  only  be  applicable  for  a 
limited  period  of  time  needed  to  re-establish  the  functioning  of  the  internal  market  and  the 
adjustment of industry to structural changes. 

4. 

BUDGETARY IMPLICATIONS 

The financial envelope for the implementation of the Regulation for the period from the date 
of its entry into force to 30 June 2025 shall be EUR 500 million in current prices. 

The impact on the multi-annual financial framework period in terms of required  budget and 
human resources is detailed in the legislative financial statement annexed to the proposal and 
will be met from the available resources of the Multiannual Financial Framework 2021-2027. 

5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

The Commission should draw up an evaluation report for the Instrument and communicate it 
to  the  European  Parliament  and  to  the  Council  no  later  than  30/6/2024.  This  report  will 
notably  assess  the  progress  made  towards  the  achievement  of  the  objectives  set  in  the 
proposal.  Also,  taking  into  account  the  evaluation  report,  the  Commission  may  submit 
proposals  for  any  appropriate  amendments  to  this  Regulation,  notably  in  view  to  continue 
addressing any persisting risks in relation to the supply of the relevant defence products. 

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2023/0140 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on establishing the Act in Support of Ammunition Production 

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  on  the  Functioning  of  the  European  Union,  and  in  particular 
Articles 114 and 173(3) thereof, 

Having regard to the proposal from the European Commission, 

After transmission of the draft legislative act to the national parliaments, 
Having regard to the opinion of the European Economic and Social Committee2, 

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

The Russian war of aggression against Ukraine has put the European defence industry 
and  equipment  market  to  the  test  and  exposed  a  number  of  flaws.  Those  undermine 
their  ability  to  satisfy  in  the  requisite  secure  and  timely  manner  the  Member  States 
urgent  needs  for  defence  products  and  systems  such  as  ammunition  and  missiles, 
considering  the  high  consumption  rate  of  those  products  or  systems  during  a  high 
intensity conflict. 

Since 24 February 2022 the Union and its Member States have been steadily stepping 
up  their  efforts  to  help  meet  Ukraine’s  pressing  defence  needs.  Furthermore,  in  this 
context, confronted with growing instability, strategic competition and security threats, 
the  Union  Heads  of  State  or  Government,  meeting  in  Versailles  on  11  March  2022, 
decided  to  take  more  responsibility  for  the  Union  own  security  and  take  further 
decisive  steps  towards  building  European  sovereignty.  They  committed  to  “bolster 
European  defence  capabilities”,  agreed  to  increase  defence  expenditures,  step  up 
cooperation through joint projects, and common procurement of defence capabilities, 
close  shortfalls,  boost  innovation  and  strengthen  and  develop  the  Union  defence 
industry. On 21 March 2022, the “Strategic Compass for a stronger Union security and 
defence in the next decade” was approved by the Council, and subsequently endorsed 
by the European Council on 24 March 2022. The Strategic Compass stresses the need 
to  increase  defence  spending  and  invest  more  in  capabilities,  both  at  the  Union  and 
national levels. 

(3) 

The  Commission  and  the  High  Representative  presented  a  Joint  Communication  on 
“The  Defence  Investment  Gaps  Analysis  and  Way  Forward”  on  18  May  2022 
highlighting  the  existence,  within  the  Union,  of  defence  financial,  industrial  and 
capability  gaps.  In  July  2022  the  Commission  presented  the  European  Defence 
Industrial  Reinforcement  through  common  Procurement  Act  (EDIRPA),  aimed  at 
supporting collaboration between Member States in the procurement phase to fill the 

2 

OJ C , , p. . 

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(4) 

(5) 

(6) 

(7) 

most urgent  and critical  gaps, especially those created by the response to  the current 
Russia’s  aggression,  in  a  collaborative  way.  EDIRPA  will  contribute  to  reinforce 
common  defence  procurement  and,  through  the  associated  Union  financing,  to 
strengthen Union defence industrial capacities and the adaptation of Union’s defence 
industry  to  structural  market  changes  resulting  from  increased  demand  due  to  new 
challenges, such as the return of high intensity conflict. 

In light of the situation in Ukraine and of its pressing defence needs in particular for 
ammunition, the Council of 20 March 2023 agreed on a three-track approach, aiming 
at  providing  one  million  rounds  of  artillery  ammunition  for  Ukraine  in  a  joint  effort 
within  the  next  twelve  months.  It  agreed  to  urgently  deliver  ground-to-ground  and 
artillery ammunition to Ukraine and, if requested, missiles from existing stocks or the 
reprioritisation of existing orders. It further called on Member States to jointly procure 
ammunition  and  if  requested  missiles  from  the  European  defence  industry  (and 
Norway)  in  the  context  of  an  existing  European  Defence  Agency  (EDA)  project  or 
through complementary Member States-led acquisition projects, in order to refill their 
stocks while enabling the continuation of support to Ukraine. To support these efforts, 
the  Council  agreed  to  mobilise  appropriate  funding  including  through  the  European 
Peace  Facility  (EPF).  The  Council  also  tasked  the  Commission  to  present  concrete 
proposals to urgently support the ramp-up of manufacturing capacities of the European 
defence  industry,  secure  supply  chains,  facilitate  efficient  procurement  procedures, 
address shortfalls in production capacities and promote investments, including, where 
appropriate, mobilising the Union budget. The latter is essential in order to ensure that 
the Union own security needs are adequately met at all times and the Union defence 
industry and internal market are up to the current changes. The three interlinked tracks 
need to be pursued in parallel and in a coordinated way. Regular meetings at the level 
of  National  Armament  Directors  with  the  Defence  Joint  Procurement  Task  Force 
(Commission, EEAS, EDA) will also be organised to assess the needs and industrial 
capabilities as well as ensure the necessary close coordination, to ensure an adequate 
implementation of the three tracks.  

On  13  April  2023,  the  Council  adopted  an  assistance  measure  under  the  EPF  worth 
EUR 1 billion to support the Ukrainian Armed Forces, allowing for the reimbursement 
to  Member  States  of  ground-to-ground  and  artillery  ammunition,  and  possibly 
missiles,  donated  to  Ukraine  from  existing  stocks  or  from  the  reprioritisation  of 
existing orders during the period 9 February to 31 May 2023. On joint procurement, 
thus far 24 Member States plus Norway signed the EDA’s Project Arrangement for the 
collaborative procurement of ammunition. 

Joint efforts to enable Member States to replenish their depleted stocks and to support 
Ukraine can only be effective if the Union supply side can deliver on time the required 
defence products.  But, with stocks rapidly dwindling, European production almost at 
maximum capacity from Member States or third countries’ orders, and prices already 
spiralling, additional Union industrial policy measures are necessary to ensure a rapid 
ramp-up of manufacturing capabilities. 

As  highlighted  by  the  work  of  the  Defence  Joint  Procurement  Task  Force 
(Commission,  EEAS,  EDA)  on  coordinating  very  short-term  defence  procurement 
needs and engaging with Member States and Union defence manufacturers to support 
common procurement to replenish stocks, notably in light of the support provided to 
Ukraine,  the  Union  industry  has  manufacturing  capacities  in  the  area  of  ground  to 
ground and artillery ammunition, as well as missiles. However, production capacities 
within the Union’s defence industry sector have been tailored for times different from 

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to  reduce  costs,  exposing 

the current challenges posed to the Union. Supply flows have been adapted according 
to  a  more  modest  demand,  with  minimal  level  of  stocks  and  diversified  suppliers 
globally 
to 
dependencies.  As  a  consequence,  in  this  context,  the  current  manufacturing  capacity 
and the existing supply and value chains do not allow for a secure and timely delivery 
of defence products  to meet  the Member States’ needs for their security requirement 
and  for  continuing  supporting  Ukrainian  needs,  creating  tensions  on  the  market  of 
ground-to-ground and artillery ammunition as well as missiles, and a risk of crowding-
out effect. An additional intervention at Union level is therefore necessary. 

the  Union’s  defence 

industry  sector 

(8) 

In  accordance  with  Article  173(3)TFEU,  the  Union  industrial  policy  pursues  the 
objective of speeding up the adjustment of industry to structural changes. Therefore, it 
appears  appropriate  to  support  Union  industry  to  increase  its  volume  of  production, 
reduce  its  delivery  lead-time  and  address  potential  bottlenecks  and/or  factors  that 
could  delay  or  impede  the  supply  and  production  of    ground-to-ground  and  artillery 
ammunition as well as missiles which are considered as relevant defence products for 
the purpose of this Regulation. 

(9) 

The measures taken at Union level should aim at reinforcing the competitiveness and 
resilience of the European Defence Technological and Industrial Base (EDTIB) in the 
field of ammunition and missiles, to allow its urgent adaptation to structural change.  

(10)  To  that  end,  an  instrument  for  financially  supporting  the  industry  reinforcement 
throughout  the  supply  and  value  chains  related  to  the  production  of  these  relevant 
defence products in the Union (the ‘Instrument’) should be established.  

(11)  The  Instrument  will  be  coherent  with  existing  collaborative  EU  defence-related 
initiatives  such  as  in  the  European  Defence  Fund,  the  proposed  European  defence 
industry  Reinforcement  through  common  Procurement  Act,  as  well  as  the  EPF  and 
generates  synergies  with  other  Union  programmes.  The  Instrument  is  fully  coherent 
with the ambition of the Strategic Compass. 

(12)  Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council 

should apply to this Instrument, unless otherwise specified.  

(13) 

In  accordance  with  Article  193(2)  of  Regulation  (EU,  Euratom)  2018/1046,  a  grant 
may be awarded for an action which has already begun, provided that the applicant can 
demonstrate the need for starting the action prior to signature of the grant agreement. 
However,  a  financial  contribution  should  not  cover  a  period  prior  to  the  date  of 
submission of the grant application, except in duly justified exceptional cases. In order 
to  address  the  call  of  the  Council  on  20  March  2023  to  speed  up  the  delivery  of 
relevant defence products, it should be possible to provide in the financing decision for 
financial contributions to actions that cover a period from this date. 

(14)  This  Regulation  lays  down  a  financial  envelope  for  the  Instrument,  which  is  to 
constitute  the  prime  reference  amount,  within  the  meaning  of  point  18  of  the  Inter-
institutional  Agreement  of 16 December 2020 between the European Parliament, the 
Council  and  the  European  Commission  on  budgetary  discipline,  on  cooperation  in 
budgetary  matters  and  on  sound  financial  management,  as  well  as  on  new  own 
resources,  including  a  roadmap  towards  the  introduction  of  new  own  resources3 
(Interinstitutional Agreement of 16 December 2020), for the European Parliament and 
for the Council during the annual budgetary procedure. 

3 

OJ L 433I, 22.12.2020, p. 28. 

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(15)  Member  States  may  request  transfers  of  resources  allocated  to  them  under  shared 
management  to  the  Instrument,  subject  to  the  conditions  set  out  in  the  relevant 
provisions of the  Regulation (EU) 2021/1060  of  the European Parliament  and of the 
Council. This could in particular be the case where the production of relevant defence 
products  faces  specific  market  failures  or  suboptimal  investment  situations  in  the 
Member States’ territories, notably in vulnerable and remote areas, and such resources 
contribute to the achievement of the objectives of the programme from which they are 
transferred.  The  possibilities  laid  out  in  Article 73(4)  of  Regulation  (EU)  2021/1060 
may  be  applied  provided  that  the  project  complies  with  the  rules  set  out  in  that 
Regulation  and  the  scope  of  the  ERDF  and  ESF+  as  set  out  in  the  fund-specific 
regulations.  In  line  with  Article  24  of  Regulation  (EU)  2021/1060,  the  Commission 
should assess the modified national programmes submitted by the Member State  and 
make  observations  within  two  months.  Given  the  urgency  of  the  situation,  the 
Commission  should  strive  to  conclude  the  assessment  of  the  modified  national 
programmes without undue delay. 

(16)  When proposing amended or new Recovery and Resilience Plans, in accordance with 
Article  21  of  Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the 
Council4, Member States should be able to propose measures which also contribute to 
the objectives of this instrument. To this end, measures linked to proposals submitted 
to a call for proposals under the Instrument, which were awarded a Seal of Excellence 
in  accordance  with  the  Instrument,  should  particularly  be  considered  by  Member 
States. 

(17) 

In accordance with Regulation (EU, Euratom) 2018/1046, Regulation (EU, Euratom) 
No 883/2013 of the European Parliament and of the Council5 and Council Regulations 
(EC,  Euratom)  No 2988/956,  (Euratom,  EC)  No 2185/967  and  (EU)  2017/19398,  the 
financial  interests  of  the  Union  are  to  be  protected  by  means  of  proportionate 
measures,  including  measures  relating  to  the  prevention,  detection,  correction  and 
investigation of irregularities, including fraud, to  the recovery of funds lost, wrongly 
paid  or  incorrectly  used,  and,  where  appropriate,  to  the  imposition  of  administrative 
penalties.  In  particular,  in  accordance  with  Regulations  (Euratom,  EC)  No 2185/96 
and  (EU,  Euratom)  No 883/2013,  the  European  Anti-Fraud  Office  (OLAF)  has  the 
power  to  carry  out  administrative  investigations,  including  on-the-spot  checks  and 
inspections,  with  a  view  to  establishing  whether  there  has  been  fraud,  corruption  or 
any other illegal activity affecting the financial interests of the Union. The European 
Public Prosecutor’s Office (EPPO) is empowered, in accordance with Regulation (EU) 
2017/1939,  to  investigate  and  prosecute  criminal  offences  affecting  the  financial 
interests  of  the  Union  as  provided  for  in  Directive  (EU)  2017/1371  of  the  European 

4 

5 

6 

7 

8 

Regulation  (EU)  2021/241  of  the  European  Parliament  and  of  the  Council  of  12  February  2021 
establishing the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17–75).- 
Regulation  (EU,  Euratom)  No 883/2013  of  the  European  Parliament  and  of  the  Council  of  11 September 
2013  concerning  investigations  conducted  by  the  European  Anti-Fraud  Office  (OLAF)  and  repealing 
Regulation  (EC)  No 1073/1999  of  the  European  Parliament  and  of  the  Council  and  Council  Regulation 
(Euratom) No 1074/1999 (OJ L 248, 18.9.2013, p. 1). 
Council  Regulation  (EC,  Euratom)  No 2988/95  of  18 December  1995  on  the  protection  of  the  European 
Communities financial interests (OJ L 312, 23.12.1995, p. 1). 
Council  Regulation  (Euratom,  EC)  No 2185/96  of  11 November  1996  concerning  on-the-spot  checks  and 
inspections carried out by the Commission in order to protect the European Communities’ financial interests 
against fraud and other irregularities (OJ L 292, 15.11.1996, p. 2). 
Council  Regulation  (EU)  2017/1939  of  12 October  2017  implementing  enhanced  cooperation  on  the 
establishment of the European Public Prosecutor’s Office (‘the EPPO’) (OJ L 283, 31.10.2017, p. 1). 

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Parliament  and  of  the  Council9.  In  accordance  with  Regulation  (EU,  Euratom) 
2018/1046,  any  person  or  entity  receiving  Union  funds  is  to  fully  cooperate  in  the 
protection of the financial interests of the Union, grant the necessary rights and access 
to  the  Commission,  OLAF,  the  Court  of  Auditors  and,  in  respect  of  those  Member 
States participating in enhanced cooperation pursuant to Regulation (EU) 2017/1939, 
the EPPO, and ensure that any third parties involved in the implementation of Union 
funds grant equivalent rights. 

(18)  Members of the European Free Trade Association which are members of the European 
Economic Area (EEA) may participate in this Instrument as associated countries in the 
framework  of  the  cooperation  established  under  the  Agreement  on  the  European 
Economic Area, which provides for the implementation of their participation to Union 
programmes  on  the  basis  of  a  decision  adopted  under  that  Agreement.  A  specific 
provision  should  be  introduced  in  this  Regulation  requiring  those  third  countries  to 
grant the necessary rights and access required for the authorising officer responsible, 
OLAF  and  the  Court  of  Auditors  to  comprehensively  exercise  their  respective 
competences. 

(19)  Given  the  specificities  of  the  defence  industry,  where  demand  comes  almost 
exclusively  from  Member  States  and  associated  countries,  which  also  control  all 
acquisition  of  defence-related  products  and  technologies,  including  exports,  the 
functioning of the defence industry sector does not follow the conventional rules and 
business  models  that  govern  more  traditional  markets.  Industry  therefore  does  not 
engage  in  substantial  self-funded  industrial  investments  but  only  does  so  as  a 
consequence of firm orders. While firm orders from Member States are a precondition 
for any investment, the Commission can intervene by de-risking industrial investments 
via  grants  and  loans  allowing  a  faster  adaptation  to  ongoing  structural  market 
change.  In the current emergency context, Union support should cover up to 60% of 
direct  eligible  costs  in  order  to  enable  beneficiaries  to  implement  actions  as  soon  as 
possible,  de-risk  their  investment  and  therefore  speed  up  the  availability  of  relevant 
defence products.  

(20)  Stakeholders  in  the  defence  industry  sector  face  specific  indirect  costs,  such  as  with 
regard to security. Therefore, it is appropriate to  allow a flat  rate of  7 % of the total 
direct eligible costs of the action. 

(21)  The  Instrument  should  provide  financial  support,  via  means  defined  by  Regulation 
(EU, Euratom) 2018/1046, to actions contributing to the timely availability and supply 
of relevant defence products such as industrial coordination and networking activities, 
access to finance for undertakings involved in the manufacturing of relevant defence 
products,  reservation  of  capacities,  industrial  process  of  reconditioning  of  expired 
products,  expansion,  optimisation,  modernisation,  upgrading  or  repurposing  of 
existing,  or  the  establishment  of  new,  production  capacities  in  this  field  as  well  as 
training of personnel.  

(22)  As the Instrument aims to enhance the competitiveness and efficiency of the Union’s 
defence  industry,  only  legal  entities,  whether  public  or  privately  owned,  which  are 
established  and  have  their  executive  management  structures  in  the  Union  or  in 
associated countries be eligible for support.  

9 

Directive (EU) 2017/1371 of the European Parliament and of the Council of 5 July 2017 on the fight against 
fraud to the Union’s financial interests by means of criminal law (OJ L 198, 28.7.2017, p. 29). 

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(23)  Legal entities established in the Union or in an associated country that are controlled 
by a non-associated third country or a non-associated third-country entity should only 
be eligible to be recipients provided that strict conditions relating to the security and 
defence interests of the Union and its Member States, as established in the framework 
of  the  Common  Foreign  and  Security  Policy  pursuant  to  Title  V  of  the  Treaty  on 
European Union (TEU), including in terms of strengthening the EDTIB, are fulfilled. 
The  participation  of  such  legal  entities  should  not  contravene  the  objectives  of  the 
Instrument. In that context, control should be understood to be the ability to exercise a 
decisive  influence  on  a  legal  entity  directly,  or  indirectly  through  one  or  more 
intermediate  legal  entities.  Applicants  should  provide  all  relevant  information  about 
the  infrastructure,  facilities,  assets,  and  resources  to  be  used  in  the  action.  Member 
States’ concerns regarding security of supply should also be taken into account in that 
respect.  In  view  of  the  urgency  of  the  situation  stemming  from  the  existing 
ammunition  supply  crisis,  the  Instrument  should  take  into  account  existing  supply 
chains.  

(24) 

Infrastructure,  facilities,  assets,  and  resources  of  the  recipients  involved  in  an  action 
supported by the Instrument should be located on the territory of a Member State or of 
an associated country for the entire duration of the action, and the recipients involved 
in an action should have their executive management structures in the Union or in an 
associated country. Accordingly, a legal entity which is established in a non-associated 
third  country  or  a  legal  entity  which  is  established  in  the  Union  or  in  an  associated 
country, but which has its executive management structures in a non-associated third 
country should not be eligible to be a recipient involved in an action 

(25)  Pursuant  to  Article  94  of  Council  Decision  2013/755/EU10,  persons  and  entities 
established in overseas countries and territories (OCTs) are eligible for funding subject 
to the rules and objectives of the Instrument and possible arrangements applicable to 
the Member State to which the relevant overseas country or territory is linked.  

(26)  When  assessing  proposals,  the  Commission  should  pay  particular  attention  to  their 
contribution  to  the  objectives  of  the  Instrument.  The  proposal  should  notably  be 
assessed against their contribution to the increase, ramp-up, reservation, modernisation 
of  manufacturing  capacities,  as  well  as  the  reskilling  and  upskilling  of  the  related 
workforce. They should also be assessed against their contribution to the reduction of 
the  delivery  lead-time  of  relevant  defence  products,  including  through  order 
reprioritization mechanisms, to the identification and elimination of bottlenecks along 
their  supply  chains  as  well  as  to  the  development  of  the  resilience  of  these  supply 
chains through the development and the operationalisation of cross-border cooperation 
of undertakings, in particular, to a significant extent, SMEs and mid-caps operating in 
the concerned supply chains. 

(27)  When  designing,  awarding  and  implementing  EU  financial  support,  the  Commission 
should  pay  particular  attention  that  such  measures  do  not  adversely  affect  the 
conditions of competition in the Internal Market. 

(28)  Furthermore,  the  current  crisis  has  not  only  demonstrated  deficiencies  in  the  EU 
defence industrial  sector, but  also  posed challenges to  the functioning of the internal 
market  of  defence  products.  Indeed,  the  current  geopolitical  context  entails  a 
significant  increase  of  the  demand  that  affects  the  functioning  of  internal  market  of 

10 

Council Decision 2013/755/EU of 25 November 2013 on the association of the overseas countries and 
territories with the European Union (Overseas Association Decision) (OJ L 344, 19.12.2013, p. 1). 

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production and sale of ground-to-ground and artillery ammunition and missiles and of 
their components in the Union. While certain Member States have taken or are likely 
to take measures to preserve their own stocks as a matter of national  security, others 
are  faced  with  difficulties  of  access  to  the  goods  needed  to  manufacture  or  acquire 
ground-to-ground and artillery ammunition and missiles. Sometimes, the difficulty to 
have access to one single raw material or to a specific component hampers the whole 
productions chains. To ensure the functioning of the internal market, it is necessary to 
adopt certain measures which will ensure, in a coordinated way, harmonised rules for 
facilitating the security of supply of defence products. These rules should include the 
mapping of the needs in goods and services in that internal market, the possibility to 
establish  priority  rated  orders  at  the  level  of  the  Union  when  at  least  three  Member 
States decide or intend of decide to procure commonly defence related products, where 
necessary to pursue an objective of general interest of security of the Union and of its 
Member  States,  and  an  acceleration  of  grant-permitting  procedures  or  facilitation  of 
procurement procedures. These measures should be based on Article 114 TFEU.  

In  order  to  take  the  necessary  and  appropriate  measures  under  this  Regulation,  the 
Commission should, on the basis of the cooperative work with the EEAS and the EDA 
in  the  context  of  the  Defence  Joint  Procurement  Task  Force,  set  up  and  maintain  a 
mapping  of  the  undertakings  established  in  the  Union  that  operate  along  the  supply 
chains of relevant defence products. The mapping should notably include the type and 
specifications of their products, their related production capacity, and their position in 
the supply chain  of the relevant  defence products. The Commission should regularly 
monitor the production capacity and the supply chains of the undertakings identified in 
the  mapping,  in  close  cooperation  with  them.  The  results  of  the  mapping  and  the 
monitoring should be presented and discussed by the Programme Committee.  

(29) 

(30)  On this basis, the Commission should draw up a list, identifying the relevant defence 
products,  raw  materials  or  components  thereof,  that  are  affected  by  disruptions  or 
potential  disruptions  of  the  functioning  of  the  Single  Market  and  its  supply  chains 
leading to  significant  shortages. The Commission  should regularly update this  list  of 
supply-critical defence products, to focus only on possible disruptions or bottlenecks 
affecting the security of supply of relevant defence products, as well as raw materials 
and components thereof.  

(31)  The Commission should be able to request to receive necessary information to ensure 
the  timely  availability  of  supply-critical  defence  products  from  economic  operators, 
dealing with these products,  raw materials or components thereof, in  agreement with 
the Member State in which they are established. Such information  should inform the 
Commission’s  decision  on  appropriate  measures  under  this  regulation  to  address 
possible disruptions or bottlenecks affecting the security of supply of relevant defence 
products as well as relevant raw materials and components.  

(32)  Such an identification, mapping and continuous monitoring mechanism should allow a 
near  real  time  analysis  of  the  production  capacity  in  the  Union,  critical  factors 
impacting security of supply of relevant defence products, stockpiles’ status. It should 
also  enable  Commission  to  design  emergency  response  measures  to  actual  or 
anticipated shortages. 

(33)  Avoiding shortages of relevant defence products is essential to preserve the objective 
of general interest of security of the Union and its Member States and justifies, where 
necessary,  proportionate  interferences  with  fundamental  rights  of  the  undertakings 
providing supply-critical defence products, such as the freedom to conduct a business 

EN 

15 

  EN 

in  accordance  with  Article  16  of  the  Charter  and  the  right  to  property  in  accordance 
with  Article  17  of  the  Charter,  in  the  respect  of  Article  52  of  the  Charter.  Such 
interferences  may  be  justified  in  particular  where  several  Member  States  have 
undertaken  specific  efforts  to  consolidate  demand  through  joint  procurement,  hence 
contributing to  the further integration and smooth  functioning of the  Internal  Market 
for  relevant  defence  products.  At  the  request  of  at  least  three  Member  States 
cooperating for the procurement of relevant defence products or at least one Member 
State procuring for the purpose of transferring the acquired relevant defence products 
to  Ukraine,  which  face  severe  difficulties  either  in  placing  or  in  the  execution  of  a 
contract, the Commission may, with the agreement of the Member State establishment, 
require  from  undertakings  to  accept  and  prioritise  orders  of  supply-critical  relevant 
products. To preserve the fundamental rights of undertaking, these requests should be 
made  only  for  products  which  have  been  identified  by  the  Commission  in  an 
Implementing Decision. In addition, a step-by-step procedure should be established in 
order to give the undertakings the possibility to express their concerns as regards the 
contemplated  action.  In  particular,  the  Commission  should,  in  agreement  with  the 
Member  State  in  which  it  is  established,  inform  the  undertakings  concerned  of  its 
intention to ask it to accept and rank first a priority rated order and provide it all the 
elements needed to allow it to take an informed decision on whether it can accept that 
request.  Where  the  undertaking  refuses,  the  Commission  can,  in  agreement  with  the 
Member State concerned, and having due regard to the nature of the objections raised 
by 
imposing,  by  an 
Implementing  Decision,  a  priority  rated  order.  Such  a  decision  should  be  taken  in 
accordance  with  all  applicable  Union  legal  obligations,  having  regard  to  the 
circumstances  of  the  case.  The  priority  rated  order  should  be  placed  at  a  fair  and 
reasonable  price.  The  priority  rated  order  should  take  precedence  over  any 
performance obligation under private or public law while it should have regard for the 
legitimate aims of the undertakings and the cost and effort required for any change in 
production sequence. Undertakings may be subject to penalties if they fail to comply 
with the obligation for priority rated orders.  

the  undertaking,  consider  that  security  reasons 

justify 

(34)  To preserve the fundamental rights of the undertakings, they should be given the right 
to ask to be released from their obligations in situations where the priority rated order 
is  not  possible  to  execute,  even  if  prioritised,  be  it  due  to  insufficient  production 
capability  or  production  capacity,  or  because  this  would  place  an  unreasonable 
economic burden and entail particular hardship on the undertaking. 

(35)  Under  the  exceptional  circumstance  that  an  undertaking  operating  along  the  supply 
chain of relevant defence products in the Union receives a priority rated order request 
from a third country, it should inform the Commission of this request. 

(36) 

In light of the importance to ensure the security of supply to specific defence sectors 
that  perform  vital  functions  for  the  security  of  Union  citizens,  compliance  with  the 
obligation  to  perform  a  priority  rated  order  should  not  entail  liability  for  damages 
towards third parties for any breach of contractual obligations that may result from the 
necessary  temporary  changes  of  the  operational  processes  of  the  concerned 
manufacturer,  limited  to  the  extent  the  violation  of  contractual  obligations  was 
necessary  for  compliance  with  the  mandated  prioritisation.  Undertakings  potentially 
within scope of a priority rated order should anticipate this possibility in the conditions 
of  their  commercial  contracts.  Without  prejudice  to  the  applicability  of  other 

EN 

16 

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provisions,  the  liability  for  defective  products,  as  provided  for  by  Council  Directive 
85/374/EEC11, should not be affected by this liability exemption. 

(37)  The  obligation 

to  prioritise 

the  production  of  certain  products  should  not 
disproportionately  affect  the  freedom  to  conduct  a  business  and  the  freedom  of 
contract laid down in Article 16 of the Charter of Fundamental Rights of the European 
Union (‘the Charter’) and the right to property laid down in Article 17 of the Charter. 
Any limitation of those rights should, in accordance with Article 52(1) of the Charter, 
be provided for by law, respect the essence of those rights and freedoms, and comply 
with the principle of proportionality. 

(38) 

In light of the importance to ensure the security of supply of relevant defence products, 
Member States should ensure that administrative applications related to the planning, 
construction and operation of production facilities, intra-EU transfer of inputs as well 
as qualification and certification of relevant end products are processed in an efficient 
and timely manner.  

(39)  To  pursue  the  general  public  policy  objective  of  security,  it  is  necessary  that 
production facilities related to the production of  relevant defence products  are set-up 
as quickly as possible, while keeping the administrative burden to a minimum. For that 
reason, Member States should  treat  applications related to  the planning,  construction 
and  operation  of  plants  and  installations  for  the  production  of  relevant  defence 
products  in  the  most  rapid  manner  possible.  They  should  be  given  priority  when 
balancing legal interests in the individual case. 

(40) 

In  view  of  the  objective  of  this  Regulation,  and  of  the  emergency  situation  and 
exceptional  context  of  its  adoption,  Member  States  should  consider  using  defence 
related exemptions under national and applicable Union law, on a case-by-case basis, 
if  they  deem  that  such  application  would  have  an  adverse  effect  on  those  purposes. 
This may in particular apply to Union law concerning environmental, health and safety 
issues,12  which  is  indispensable  to  improve  the  protection  of  human  health  and 
environment,  as  well  as  achieve  a  sustainable  and  safe  development.  However,  their 
implementation  may  also  produce  regulatory  barriers  hampering  the  Union  defence 
industry’s  potential  to  ramp  up  the  production  and  deliveries  of  relevant  defence 
products.  It  is  a  collective  responsibility  for  the  European  Union  and  its  Member 
States to urgently look into any action it may take to mitigate possible obstacles. Any 
such  actions,  whether  at  Union,  regional,  or  national  level,  should  not  compromise 
environmental, health and safety concerns. 

(41) 

In order to optimize the use of existing supply chains, hence ensuring the continuity of 
production  of  relevant  defence  products,  Member  States  should  consider  the 
possibility to recourse or to encourage concerned companies to recourse to derogations 
provided  for  by  Directive  2003/88/EC  of  the  European  Parliament  and  of  the 
Council13. Where a prior authorization from national authorities is required to use such 
derogations, applications should be processed in an efficient and timely manner. 

11 

12 

13 

Council  Directive  85/374/EEC  of  25  July  1985  on  the  approximation  of  the  laws,  regulations  and 
administrative provisions of the Member States concerning liability for defective products (OJ L 210, 
7.8.1985, p. 29). 
For  instance,  the  REACH,  CLP  regulation,  the  Seveso  Directive,  RoHS  Directive,  POPs  Regulation, 
BPR, Ozone regulation and the F-gas regulation. 
Directive 2003/88/EC of the European Parliament and of the Council  of 4 November 2003 concerning 
certain aspects of the organisation of working time (OJ L 299, 18.11.2003, p. 9). 

EN 

17 

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(42)  Directive  2009/81/EC  of  the  European  Parliament  and  of  the  Council14  aims  at 
harmonising procurement procedures for the award of public contracts in the field of 
defence  and  security  which  enables  to  meet  the  security  requirements  of  Member 
States and the obligations arising from the Treaty. That Directive notably provides for 
specific  provisions  ruling  situations  of  urgency  resulting  from  a  crisis,  notably 
shortened  periods  for  the  receipt  of  tenders  and  the  possibility  to  use  the  negotiated 
procedure  without  prior  publication  of  a  contract  notice.  However,  the  extreme 
urgency  caused  by  the  current  ammunition  supply  crisis  may  be  incompatible  even 
with those provisions in cases where more than two Member States intend to engage in 
a  common  procurement.  In  some  cases,  the  only  solution  to  ensure  the  security 
interests  of  those  Member  States  is  to  open  an  existing  framework  agreement  to 
contracting  authorities/entities  of  Member  States  that  were  not  originally  party  to  it, 
even  though  that  possibility  had  not  been  provided  for  in  the  initial  framework 
agreement. 

(43) 

In  accordance  with  the  case-law  of  the  Court  of  Justice  of  the  European  Union, 
modifications to a contract shall be strictly limited to what is absolutely necessary in 
the  circumstances,  while  complying  to  the  maximum  extent  possible  with  the 
principles  of  non-discrimination,  transparency  and  proportionality.  In  this  regard,  it 
should be possible to derogate from Directive 2009/81/EC by increasing the quantities 
provided  for  in  the  Framework  Agreement  while  opening  it  to  contracting 
authorities/entities  of  other  Member  States.  These  contracting  authorities/entities 
should enjoy the same conditions as the original contracting authority that concluded 
the  original  framework  agreement  for  those  additional  quantities.  In  such  cases,  the 
contracting  authority  should  also  allow  any  economic  operator  who  fulfils  the 
conditions  of  the  original  framework  agreement  to  become  a  contractor  under  that 
framework agreement. In addition, appropriate transparency measures should be taken 
to ensure that all potentially interested parties may be informed. In order to limit the 
effects of these modifications on the smooth functioning of the internal market and to 
prevent  disproportionate  distortions  of  competition,  modifications  of  framework 
agreements should only be concluded until 30 June 2025. 

(44)  Directive  2009/43/EC  of  the  European  Parliament  and  the  Council15  aims  at 
simplifying the terms and conditions of intra-EU transfers of defence-related products, 
notably through General Transfer Licences which rely on ex post verification, cover a 
pre-determined range of products to specified recipients or for a specific purpose, and 
for  which  no  prior  request  is  needed.  However,  none  of  the  mandatory  General 
Transfer  Licences  provided  for  by  Article  4  (1)  of  Directive  2009/43/EC  or 
Commission recommendations on the harmonisation of the scope of and conditions for 
these  licences  are  sufficient  to  ensure  that  transfers  necessary  for  the  production  of 
relevant defence products.  

(45) 

In the current  context  which imposes  to  speed up the delivery lead times throughout 
the concerned supply and value chains, it appears necessary to exempt the transfer of 

14 

15 

Directive  2009/81/EC  of  the  European  Parliament  and  of  the  Council  of  13  July  2009  on  the 
coordination  of  procedures  for  the  award  of  certain  works  contracts,  supply  contracts  and  service 
contracts  by  contracting  authorities  or  entities  in  the  fields  of  defence  and  security,  and  amending 
Directives 2004/17/EC and 2004/18/EC (OJ L 216, 20.8.2009, p. 76–136). 
Directive 2009/43/EC of the European Parliament and of the Council of 6 May 2009 simplifying terms 
and conditions of transfers of defence-related products within the Community (OJ L 146, 10.6.2009, p. 
1–36). 

EN 

18 

  EN 

                                                 
(46) 

relevant defence products from the obligation of prior authorisation within the Union. 
This exemption should not affect the discretion of Member States as regards policy on 
the export of defence-related products. 

In order to be competitive, innovative and resilient, as well as to be able to ramp up its 
production  capacities,  the  EDTIB  needs  to  access  both  public  and  private  financing. 
As  provided  in  the  “Commission  contribution  to  European  defence”  of  15  February 
2022, Union initiatives on sustainable finance are consistent with the Union efforts to 
facilitate the European defence industry’s sufficient access to finance and investment. 
In that context, the EU sustainable finance framework does not prevent investment in 
defence-related  activities.  The  Union  defence  industry  is  a  crucial  contributor  to  the 
resilience,  security  of  the  Union,  and  therefore  to  peace  and  social  sustainability. 
Within Union initiatives on sustainable finance policies, controversial weapons subject 
to  international  conventions  prohibiting  their  development,  production,  stockpiling, 
use,  transfer,  and  delivery,  and  signed  by  Union  Member  States,  are  deemed 
incompatible  with  social  sustainability.  The  sector  is  subject  to  close  regulatory 
scrutiny  implemented  by  Member  States  for  the  transfer  and  export  of  military  and 
dual-use items. In this perspective, a commitment of national and European financial 
actors - such as National Promotional Banks and Institutions - to support the European 
defence industry, would send a strong signal to the private sector. While pursuing in 
full  its  other  economic  development  and  public  policy  financing  missions,  including 
the  twin  transition  and  in  line  with  article  309  TFEU  as  well  as  its  statute,  the 
European Investment Bank (EIB) should enhance its support to the European defence 
industry  and  joint  procurement  beyond  its  ongoing  support  to  dual  use,  where  such 
investments would clearly serve to implement the Strategic Compass priorities. 

(47)  Undertakings  in  the  value  chain  of  relevant  defence  products  should  have  access  to 
debt financing, to speed-up investments needed to increase manufacturing capacities. 
The  Instrument  should  facilitate  access  to  finance  for  Union’s  companies  in  the 
ammunition  and missile field.  The  Regulation should notably  ensure that those legal 
entities are granted the same conditions offered to other legal entities, taking charge of 
any additional cost arising specifically for the defence sector.  

(48)  The Commission may set-up a dedicated facility as part of the investment facilitation 
activities  described  collectively  as  the  ‘Ramp-up  fund’.  The  Ramp-up  Fund  may  be 
implemented in direct or indirect management. The Commission should explore in that 
regard the most appropriate way to leverage EU budget to unlock public and private 
investment in support of the rapid ramp up sought, for instance through the possibility 
of a blending facility, including under InvestEU Fund established by Regulation (EU) 
2021/523  of  the  European  Parliament  and  Council16,  in  close  cooperation  with  its 
implementing partners. The ‘Ramp-up Fund’ activities should support the increase of 
manufacturing  capacities  in  the  ammunition  and  missiles  area  by  providing 
opportunities for increased availability of funds to companies across the value chain. 

(49) 

In  order  to  ensure  uniform  conditions  for  the  implementation  of  this  Regulation, 
implementing powers should be conferred on the Commission as regards the adoption 
of the Work Programme and of the list of supply-critical defence products, for issuing 
obligations for undertakings concerned by a request for a priority rated order to accept 

16 

Regulation  (EU)  2021/523  of  the  European  Parliament  and  of  the  Council  of  24  March  2021 
establishing the InvestEU Programme and amending Regulation (EU) 2015/1017 (OJ L 107, 26.3.2021, 
p. 30–89). 

EN 

19 

  EN 

                                                 
or perform that order at a fair and reasonable price and for laying down the practical 
and  operational  arrangements  for  the  functioning  of  priority  rated  orders.  Those 
powers should be exercised in accordance with  Regulation (EU) No 182/2011 of the 
European Parliament and of the Council17. The Commission should adopt immediately 
applicable implementing acts where, in duly justified cases relating to the adoption of 
the  list  of  supply-critical  defence  products,  for  issuing  obligations  for  undertakings 
concerned by a request  for a priority  rated order to  accept  or perform that  order at  a 
fair  and  reasonable  price  and  for  laying  down  the  practical  and  operational 
arrangements for the functioning of priority rated orders, where imperative grounds of 
urgency so require. 

(50)  Since  the  objective  of  this  Regulation  namely,  to  respond  to  the  impact  of  security 
crisis, cannot be sufficiently achieved by the Member States but can rather, by reason 
of the scale and effects of the proposed action, be better achieved at Union level, the 
Union may adopt measures, in accordance with the principle of subsidiarity as set out 
in  Article  5  of  the  Treaty  on  European  Union  (“TEU”).  In  accordance  with  the 
principle  of  proportionality,  as  set  out  in  that  Article,  this  Regulation  does  not  go 
beyond what is necessary to achieve that objective.s. 

(51)  This  Regulation  should  apply  without  prejudice  to  Union  competition  rules,  in 

particular Articles 101 to 109 TFEU and their implementing regulations. 

(52) 

(53) 

It is to be recalled that according to Article 41(2) TEU, operating expenditure arising 
from  Chapter  2  of  Title  V  shall  be  charged  to  the  Union  budget,  except  for  such 
expenditure arising from operations having military or defence implications. 

In view of the urgency to address the security crisis it is appropriate to provide for an 
exception to the eight-week period referred to in Article 4 of Protocol No 1 on the role 
of national Parliaments in the European Union, annexed to the TEU, to the Treaty on 
the  Functioning  of  the  European  Union  and  to  the  Treaty  establishing  the  European 
Atomic  Energy  Community.  Considering  the  imminent  danger  for  the  security  of 
supply brought about by Russia’s war of aggression against Ukraine, this Regulation 
should enter into force the day after its publication in the Official Journal. 

(54)  Pursuant to paragraphs 22 and 23 of the Interinstitutional Agreement of 13 April 2016 
on  Better  Law-Making18,  the  Regulation  should  be  evaluated  on  the  basis  of 
information  collected  in  accordance  with  specific  monitoring  requirements,  while 
in  particular  on  Member  States,  and 
avoiding  an  administrative  burden, 
overregulation.  Those  requirements,  where  appropriate,  should  include  measurable 
indicators  as  a  basis  for  evaluating  the  effects  of  the  Regulation  on  the  ground.  The 
Commission should carry out an evaluation no later than 30 June 2024, including with 
a view to submitting proposals for any appropriate amendments to this Regulation. 

17 

18 

Regulation  (EU)  No  182/2011  of  the  European  Parliament  and  of  the  Council  of  16  February  2011 
laying down the rules and general principles concerning mechanisms for control by the Member States 
of the Commission's exercise of implementing powers (OJ L 55, 28.2.2011, p. 13). 
OJ L 123, 12.5.2016, p. 1–14. 

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HAVE ADOPTED THIS REGULATION: 

CHAPTER I 

GENERAL PROVISIONS 

Article 1 

Subject matter 

This  Regulation  establishes  a  set  of  measures  and  lays  down  a  budget  aimed  at  urgently 
strengthening  the  responsiveness  and  ability  of  the  European  Defence  Technological  and 
Industrial Base (EDTIB) to ensure the timely availability and supply of ground-to-ground and 
artillery  ammunition  as  well  as  missiles  (‘relevant  defence  products’),  in  particular  through 
the following: 

(a) 

(b) 

(c) 

an  instrument  financially  supporting  industrial  reinforcement  for  the  production  of 
the  relevant  defence  products  in  the  Union,  including  through  the  supply  of  their 
components (‘the ‘Instrument’); 

the  identification,  mapping  and  continuous  monitoring  of  the  availability  of  the 
relevant  defence  products,  their  components  and  the  corresponding  inputs  (raw 
materials);  

the  establishment  of  mechanisms,  principles,  and  temporary  rules  to  secure  the 
timely and lasting availability of the relevant  defence products  to  their  acquirers in 
the Union. 

Based  on  an  evaluation,  pursuant  to  Article  28  below,  of  the  results  achieved  by  the 
implementation  of  this  Regulation  by  mid-2024,  notably  in  regard  of  the  evolution  of  the 
security context,  the opportunity of the  extension of the applicability of the set  of measures 
and of the allocation of the corresponding additional budget will be considered. 

Article 2 

Definitions 

For the purposes of this Regulation, the following definitions apply: 

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

‘raw materials’ means the materials required to produce relevant defence products; 

‘bottleneck”  means  a point  of  congestion  in a  production  system  that  stops  or 
severely slows the production; 

‘recipient’  means  an  entity  with  which  a  funding  or  financing  agreement  has  been 
signed, or to which a funding or financing decision has been notified; 

‘applicant’ means a natural person or an entity with or without legal personality who 
has submitted an application in a grant award procedure;  

‘control’ means the ability to exercise a decisive influence on a legal entity directly, 
or indirectly through one or more intermediate legal entities; 

‘executive  management  structure’  means  a  body  of  a  legal  entity,  appointed  in 
accordance with national law, and, where applicable, reporting to the chief executive 
officer,  which  is  empowered  to  establish  the  legal  entity’s  strategy,  objectives  and 
overall direction, and which oversees and monitors management decision-making; 

EN 

21 

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(7) 

(8) 

(9) 

(10) 

(11) 

(12) 

(13) 

(14) 

(15) 

‘entity’ means a legal person created and recognised as such under Union, national or 
international law, which has legal personality and the capacity to act in its own name, 
exercise rights and be subject to obligations, or an entity which does not have legal 
personality as referred to in point (c) of Article 197(2) of Regulation (EU, Euratom) 
2018/1046; 

‘classified information’ means information or material, in any form, the unauthorised 
disclosure of which could cause varying degrees of prejudice to the interests of the 
Union, or of one or more of the Member States, and which bears an EU classification 
marking or a corresponding classification marking, as established in the Agreement 
between  the  Member  States  of  the  European  Union,  meeting  within  the  Council, 
regarding  the  protection  of  classified  information  exchanged  in  the  interests  of  the 
European Union; 

‘sensitive  information’  means  information  and  data  that  is  to  be  protected  from 
unauthorised  access  or  disclosure  because  of  obligations  laid  down  in  Union  or 
national  law  or  in  order  to  safeguard  the  privacy  or  security  of  a  natural  or  legal 
person; 

‘non-associated third-country entity’ means a legal entity that is established in a non-
associated third country  or, where it is  established in  the Union or in  an associated 
country,  that  has  its  executive  management  structures  in  a  non-associated  third 
country; 

‘lead  production  time’  means  the  period  of  time  between  a  purchase  order  being 
placed and the manufacturer completing the order; 

‘relevant  defence  products’  means  ground-to-ground  and  artillery  ammunition  as 
well as missiles. 

‘supply-critical  defence  products’  means  relevant  defence  products  or  key 
components  or  raw  materials  thereof  that  have  been  identified  as  being  seriously 
affected by disruption or potential disruption of the functioning of the Single Market 
and its supply chains resulting in actual or potential significant shortages. 

‘blending  operation’  means  an  action  supported  by  the  Union  budget,  including 
within  a  blending  facility  or  platform  as  defined  in  point  (6)  of  Article  2  of  the 
Financial  Regulation,  that  combines  non-repayable  forms  of  support  or  financial 
instruments  from  the  Union  budget  with  repayable  forms  of  support  from 
development or other public finance institutions as well as from commercial finance 
institutions and investors; 

‘Seal of Excellence’ means a quality label which shows that a proposal submitted to 
a call for proposals under the  Instrument has passed all of the evaluation thresholds 
set  out  in  the  work  programme,  but  could  not  be  funded  due  to  a  lack  of  budget 
available  for  that  call  for  proposals  in  the  work  programme,  and  might  receive 
support from other Union or national sources of funding;  

Article 3 

Third countries associated to the Instrument 

The  Instrument  shall  be  open  to  the  participation  of  members  of  the  European  Free  Trade 
Association  which  are  members  of  the  European  Economic  Area  (associated  countries),  in 
accordance with the conditions laid down in the Agreement on the European Economic Area. 

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CHAPTER II 

THE INSTRUMENT 

Article 4 

Objectives of the Instrument 

1. 

2. 

1. 

2. 

3. 

19 

20 

The objective of the Instrument is to foster the efficiency and competitiveness of the 
European Defence Technological  and  Industrial  Base  (EDTIB) to  support  the  ramp 
up  of  the  production  capacity  and  timely  delivery  of  relevant  defence  products 
through industrial reinforcement. 

The industrial reinforcement shall in particular consist of initiating and speeding up 
the  adjustment  of  industry  to  the  rapid  structural  changes  imposed  by  the  supply 
crisis affecting the relevant defence products. This should include the improvement 
and acceleration of the capacity of adaptation of supply chains for relevant defence 
products, the creation of manufacturing capacities or their ramp-up, and a reduction 
of their lead production time for the relevant defence products throughout the Union 
notably  thanks  to  the  intensification  and  widening  of  cross-border  cooperation 
between the relevant legal entities. 

Article 5 

Budget 

The financial envelope for the implementation of the Instrument for the period from 
its  entry  into  force  until  30  June  2025  shall  be  set  a  EUR  500  Million  in  current 
prices. 

Within  the  financial  envelope  defined  in  paragraph  1  of  this  article,  up  to  EUR  50 
Million  may  be  used  as  a  blending  operation  in  the  frame  of  the  ‘Ramp-up  Fund’ 
defined in article 21.  

Resources  allocated  to  Member  States  under  shared  management  may,  at  their 
request,  be  transferred  to  the  Instrument  subject  to  the  conditions  set  out  in  the 
relevant  provisions  of  the  Regulation  (EU)  2021/1060  of  the  European  Parliament 
and  the  Council19.  The  Commission  shall  implement  those  resources  directly  in 
accordance  with  point  (a)  of  the  first  subparagraph  of  Article  62(1)  of  Regulation 
(EU,  Euratom)  2018/1046  of  the  European  Parliament  and  the  Council20.  Those 
resources shall be used for the benefit of the Member State concerned. 

Regulation  (EU)  2021/1060  of  the  European  Parliament  and  of  the  Council  of  24  June  2021  laying 
down  common  provisions  on  the  European  Regional  Development  Fund,  the  European  Social  Fund 
Plus,  the  Cohesion  Fund,  the  Just  Transition  Fund  and  the  European  Maritime,  Fisheries  and 
Aquaculture Fund and financial rules for those and for the Asylum, Migration and Integration Fund, the 
Internal  Security  Fund  and  the  Instrument  for  Financial  Support  for  Border  Management  and  Visa 
Policy (OJ L 231, 30.6.2021, p. 159–706). 
Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council of 18 July 2018 on 
the  financial  rules  applicable  to  the  general  budget  of  the  Union,  amending  Regulations  (EU)  No 
1296/2013, (EU) No 1301/2013, (EU) No 1303/2013, (EU) No 1304/2013, (EU) No 1309/2013, (EU) 
No  1316/2013,  (EU)  No  223/2014,  (EU)  No  283/2014,  and  Decision  No  541/2014/EU  and  repealing 
Regulation (EU, Euratom) No 966/2012 (OJ L 193, 30.7.2018, p. 1–222). 

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4. 

5. 

6. 

1. 

Where  the  Commission  has  not  entered  into  a  legal  commitment  under  direct 
management  for  resources  transferred  in  accordance  with  this  paragraph,  the 
corresponding  uncommitted  resources  may  be  transferred  back  to  the  Fund  from 
which they have been initially transferred and allocated to one or more programmes 
in  accordance  with  the  conditions  set  out  in  the  relevant  provisions  of  Regulation 
(EU) 2021/1060. 

The  amount  referred  to  in  paragraph  1  may  also  be  used  for  technical  and 
administrative  assistance  for  the  implementation  of  the  Instrument,  such  as 
preparatory,  monitoring,  control,  audit  and  evaluation  activities  including  corporate 
information technology systems. 

Budgetary  commitments  for  activities  extending  over  more  than  one  financial  year 
may be broken down over several years into annual instalments. 

The budget of the instrument can be reinforced, where the situation requires it or in 
case the Regulation is extended, in accordance with Article 1, last paragraph. 

Article 6 

Cumulative and alternative funding 

The Instrument shall be implemented in synergy with other Union programmes. An 
action  that  has  received  a  contribution  from  another  Union  programme  may  also 
receive  a  contribution  under  the  Instrument,  provided  that  the  contributions  do  not 
cover the same costs. The rules of the relevant Union programme shall apply to the 
corresponding contribution to the action. The cumulative financing shall not exceed 
the  total  eligible  costs  of  the  action.  The  support  from  the  different  Union 
programmes may be calculated on a pro-rata basis in accordance with the documents 
setting out the conditions for support. 

2. 

In  order  to  be  awarded  a  Seal  of  Excellence  under  the  Instrument,  actions  shall 
comply with all of the following conditions:  

(a) 

they have been assessed in a call for proposals under the Instrument;  

(b) 

they comply with the minimum quality requirements of that call for proposals;  

(c) 

they  are  not  financed  under  that  call  for  proposals  due  to  budgetary 
constraints.  

3. 

When proposing amended or new Recovery and Resilience Plans, in accordance with 
Regulation  (EU)  2021/241  of  the  European  Parliament  and  the  Council,  Member 
States  shall  be  able  to  include  measures  which  also  contribute  to  the  objectives  of 
this  instrument,  notably  measures  linked  to  proposals  submitted  to  a  call  for 
proposals under the Instrument which were awarded a Seal of Excellence. 

4. 

Article 8(5) shall apply by analogy to actions funded in accordance with this Article. 

Article 7 

Forms of Union funding 

1. 

The Instrument shall be implemented under direct management and as concerns the 
management of the Ramp-up Fund of Article 21 in indirect management with bodies 
referred to in Article 62(1)(c) Regulation (EU, Euratom) 2018/1046. The Instrument 
may  provide  funding  in  any  of  the  forms  laid  down  in  the  Financial  Regulation, 

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2. 

1. 

2. 

3. 

including financing in the form of financial instruments within blending operations. 
Blending  operations  shall  be  carried  out  in  accordance  with  Title  X  of  Regulation 
(EU,  Euratom)  2018/1046,  Regulation  (EU)  2021/523  and  Article  21  of  this 
Regulation.  

By  way  of  derogation  from  Article  193(2)  from  Regulation  (EU,  Euratom) 
2018/1046,  financial  contributions  may,  where  relevant  and  necessary  for  the 
implementation of an action, cover actions started prior to the date of the submission 
of the proposal for those actions, provided that those actions did not start before 20 
March 2023. 

Article 8 

Eligible actions  

Only  actions  implementing  the  objectives  set  out  in  Article  4  shall  be  eligible  for 
funding. 

The  Instrument  shall  provide  financial  support  for  actions  addressing  identified 
bottlenecks  in  production  capacities  and  supply  chains  with  a  view  to  secure  and 
accelerate  production  to  ensure  the  effective  supply  and  timely  availability  of  the 
relevant defence products. 

Eligible  actions  shall  relate  to  one  or  more  of  the  following  activities  and  be 
exclusively  related  to  the  production  capacities  of  relevant-defence  products, 
including  their  components  and  raw  materials  insofar  as  they  are  intended  or  used 
wholly for the production of relevant defence products: 

(a) 

(b) 

(c) 

(d) 

the  optimisation,  expansion,  modernisation,  upgrading  or  repurposing  of 
existing, or the establishment of new, production capacities, in  relation  to  the 
relevant defence products or their raw materials and components, insofar as the 
latter are used as direct input for the production of relevant defence products, 
notably  with  a  view  to  increasing  production  capacity  or  reducing  lead 
production  times,  including  on  the  basis  of  the  procurement  or  acquisition  of 
the requisite machine tools and any other necessary input; 

the  establishment  of  cross-borders  industrial  partnerships,  including  through 
public private partnerships or other forms  of industrial cooperation, in  a  joint 
industrial effort, including activities that aim at the coordination of the sourcing 
or  reservation  of  raw  materials  and  components  insofar  the  latter  are  used  as 
direct  input  for  the  production  of  relevant  defence  products,  as  well  as 
production capacities and at the coordination of production plans; 

the  building-up  and  making  available  of  reserved  surge  manufacturing 
capacities of relevant-defence products, raw materials and components thereof, 
insofar the latter are used as direct input for the production of relevant defence 
products, in accordance with ordered or planned production volumes; 

the  testing  and,  as  appropriate,  reconditioning  certification,  as  appropriate,  of 
relevant  defence  products  with  a  view  to  addressing  their  obsolescence  and 
making them useable by end users; 

(e) 

the  training,  reskilling  or  upskilling  of  personnel  in  relation  to  the  activities 
referred to in points (a) to (d) of this article; 

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(f) 

the improvement of the access to finance by relevant economic operators active 
in  the  production  of  or  making  available  the  relevant  defence  products,  by 
means of the offset of any additional cost arising specifically from the defence 
industry  sector,  for  investments  related  to  activities  described  in  points  (a)  to 
(e) of this article. 

4. 

The following actions shall not be eligible for funding under the Instrument: 

5. 

1. 

2. 

(a) 

(b) 

(c) 

(d) 

actions  related  to  the  production  of  goods  or  delivery  of  services  which  are 
prohibited by applicable international law; 

actions  related  to  the  production  of  lethal  autonomous  weapons  without  the 
possibility  for  meaningful  human  control  over  selection  and  engagement 
decisions when carrying out strikes against humans; 

actions  or  parts  thereof,  that  are  already  fully  financed  from  other  public  or 
private sources; 

actions  entailing  expenditures  arising  from  operations  having  military  or 
defence implications. 

The  Commission  shall  ensure  in  concluding  agreements  with  individual  recipients 
that  the  instrument  only  finances  activities  which  exclusively  benefit  production 
capacities  of  relevant  defence  products,  or  of  their  components  and  raw  materials 
insofar  as  they  are  intended  or  used  wholly  for  the  production  of  relevant  defence 
products.  

Article 9 

Financing rate 

The Instrument shall finance up to 40% of the eligible costs of an eligible action. 

By way of derogation from paragraph 1, an action shall be eligible for an increased 
funding rate of 10 additional percentage points for each of the following criteria: 

(a)  where  applicants  demonstrate  a  contribution  to  the  creation  of  new  cross-
border  cooperation  between  legal  entities  established  in  Member  States  or 
associated countries, as described in article 10(4); 

(b)  where applicants commit that they will prioritize for the duration of the action 
orders stemming from the  common  procurement  of relevant  defence products 
by  at  least  three  Member  States  or  associated  countries  or  from  the 
procurement  of  relevant  defence  products  from  at  least  one  Member  State  of 
relevant  defence  products  which  procure  for  the  purpose  of  transferring 
acquired relevant defence products to Ukraine. This commitment shall apply to 
any procurement of any product directly or indirectly benefitting from support 
under this Instrument. 

By  way  of  derogation,  support  from  the  instrument  may  cover  up  to  100  %  of  the 
eligible costs of an activity referred to article 8(3), point (f). 

3. 

The recipients  shall demonstrate that the costs of an action that are not  covered by 
Union support are to be covered by other means of financing. 

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26 

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Article 10 

Eligible entities 

1. 

2. 

3. 

Recipients  involved  in  an  action  shall  be  legal  entities,  whether  public  or  privately 
owned, established in the Union or in an associated country. 

The  infrastructure,  facilities,  assets,  and  resources  of  the  recipients  involved  in  an 
action which are used for the purposes of an action supported by the Instrument shall 
be  located  on  the  territory  of  a  Member  State  or  of  an  associated  country  for  the 
entire  duration  of  an  action,  and  their  executive  management  structures  shall  be 
established in the Union or in an associated country. 

An undertaking established in the Union or in an associated country and controlled 
by a non-associated third country or a non-associated third-country entity shall only 
be  eligible  to  be  a  recipient  involved  in  an  action  supported  by  the  Instrument  if 
guarantees  approved  by  the  Member  State  or  the  associated  country  in  which  the 
undertaking  is  established  make  available  to  the  Commission  guarantees  in 
accordance with its national procedures, ensuring that the involvement in an action of 
such  a  undertaking  would  not  contravene  the  security  and  defence  interests  of  the 
Union and its Member States as established in the framework of the CFSP pursuant 
to Title V of the TEU, or the objectives set out in Article 4 of this Regulation. The 
guarantees  shall  in  particular  substantiate  that,  for  the  purposes  of  an  action, 
measures are in place to ensure that: 

(a) 

(b) 

(c) 

the recipient  is  able to  carry  out the  action  and to deliver results without any 
resources, 
infrastructure, 
restrictions  concerning 
intellectual property or knowhow needed for the purposes of the action, or that 
undermines its capabilities and standards necessary to carry out the action; 

facilities,  assets, 

its 

the  products  being  produced  by  undertakings  having  benefitted  from  the 
Instrument financial support are not subject to a restriction by a non-associated 
third country or a non-associated third country entity; and 

access  by a non-associated third country or by  a non-associated third-country 
entity  to  sensitive  or  classified  information  relating  to  the  action  is  prevented 
and  the  employees  or  other  persons  involved  in  the  action  have  national 
security  clearance  issued  by  a  Member  State  or  an  associated  country,  where 
appropriate. 

4. 

5. 

If  considered  to  be  appropriate  by  the  Member  State  or  the  associated  country  in 
which the undertaking is established, additional guarantees may be provided. 

The  Commission  shall  inform  the  committee  referred  to  in  Article  22  of  any 
undertaking considered to be eligible in accordance with paragraph 3. 

Article 11 

Award criteria  

Each  proposal  shall  be  assessed  on  the  basis  of  one  or  more  of  the  following  criteria 
measuring  the  contribution  of  the  relevant  actions  to  the  industrial  reinforcement  sought  to 
foster  the  efficiency  and  overall  competitiveness  of  the  EDTIB,  in  respect  to  the  relevant 
defence products: 

(1) 

Increase  in  production  capacity  in  the  Union:  the  contribution  of  the  action,  in 
relation to the relevant defence products, to the increase, ramp-up, or reservation of 

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(2) 

(3) 

(4) 

(5) 

(6) 

1. 

2. 

3. 

1. 

the manufacturing capacities, their modernisation or the reskilling and upskilling of 
the related workforce; 

Reduction  of  delivery  lead  time:  the  contribution  of  the  action  to  the  timely 
satisfaction  of  the  demand  expressed  through  procurement  in  terms  of  reduced 
delivery lead times, including via order reprioritization mechanisms; 

Elimination of sourcing and production bottlenecks: the contribution of the action to 
the  swift  identification  and  rapid  and  lasting  elimination  of  any  sourcing  (raw 
material and any other input) or production (manufacturing ability) bottlenecks; 

Resilience  through  cross-border  cooperation:  the  contribution  of  the  action  to  the 
development  and  operationalisation  of  cross-border  cooperation  between 
undertakings  established  in  different  Member  States  or  associated  countries, 
involving  in  particular,  to  a  significant  extent,  SMEs  or  mid-caps  as  recipients, 
subcontractors or as other undertakings in the supply chain; 

The demonstration by the applicants of the link between the action and newly placed 
orders stemming from the joint procurement of relevant defence products by at least 
three Member States or associated countries especially if done in a EU framework; 

The  quality  of  the  implementation  plan  of  the  action,  including  in  terms  of  its 
processes and monitoring. 

Article 12 

Work Programme  

The Instrument shall be implemented through a single work programme as referred 
to  in  Article 110 of Regulation  (EU, Euratom) 2018/1046. Work programmes shall 
set out, where applicable, the overall amount reserved for blending operations. 

The Commission shall, by means of an implementing act, adopt the work programme 
referred to in paragraph 1. The implementing act shall be adopted in accordance with 
the examination procedure referred to in Article 22(3). 

The  work  programme  shall  set  out  the  funding  priorities  in  line  with  the  mapping 
referred  to  in  Article  13(1)  and  taking  into  account  the  work  of  the  Defence  Joint 
Procurement Task Force. 

CHAPTER III 

IDENTIFICATION AND MAPPING 

Article 13 

Identification of needs, mapping and monitoring of capacities  

The Commission, based on the cooperative work with the EEAS and the EDA in the 
context  of  the  Defence  Joint  Procurement  Task  Force,  shall  set  up  and  maintain  a 
mapping  of  relevant  undertakings  established  in  the  Union  that  operate  along  the 
supply chains of the relevant defence products, including for instance, the type and 
specifications  of  the  relevant  defence  products  produced,  their  related  production 
capacity and their position in the supply chain.  

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2. 

3. 

4. 

5. 

6. 

Based  on  this  mapping,  the  Commission  shall,  in  close  cooperation  with  the 
identified  undertakings,  continuously  monitor  their  production  capacity  and  their 
supply chains and assess their overall ability to respond to the expected evolution of 
the market demand.  

The  Commission  shall  present  to,  and  regularly  discuss  with,  the  Committee  as 
referred to in Article 22, the results of the mapping or its update, of the monitoring of 
the  supply  chains,  and  its  assessment  of  the  overall  ability  of  the  identified 
undertakings to respond to the expected evolution of the market demand. In doing so, 
the  Commission  will  take  into  account  the  work  carried  out  in  the  context  of  the 
regular  meetings  of  the  National  Armaments  Directors  with  the  Defence  Joint 
Procurement Task Force.  

Based on information gathered pursuant to paragraph 1 and taking due account of the 
discussion held under paragraph 2, the Commission shall by means of implementing 
acts,  draw up and  regularly update a list  of supply-critical  defence products.  Those 
implementing  acts  shall  be  adopted  in  accordance  with  the  examination  procedure 
referred  to  in  Article  22(3).  On  duly  justified  imperative  grounds  of  urgency  in 
relation  with  the  supply  crisis,  the  Commission  shall  adopt  immediately  applicable 
implementing acts in accordance with the procedure referred to in Article 22(4). 

In  agreement  with  the  Member  State  where  they  are  established,  the  Commission 
may request from the undertakings that provide supply-critical defence products and 
in relation to those, to receive, within five working days, detailed information on: 

(a) 

the total production capacity in the relevant supply-critical defence products; 

(b) 

the existing and expected variations in stocks of such products; 

(c) 

(d) 

any existing schedule of the expected production output for the following three 
months for each production facility located in the union or elsewhere; 

any additional information relevant to ensure the timely availability of supply-
critical defence products. 

Without  prejudice  to  national  security  interests,  Member  States  shall,  where 
appropriate, provide the Commission with additional information needed to achieve 
the objectives of this Regulation.  

Without  prejudice  to  national  security  interests  and  the  protection  of  commercially 
confidential  information  resulting  from  agreements  entered  into  by  Member  States, 
where  a  Member  State  intends  to  adopt  at  national  level  measures  for  the 
procurement, purchase or manufacturing of supply-critical defence products from the 
list referred in paragraph 3, it shall inform the Commission in a timely manner. 

CHAPTER IV 

SECURITY OF SUPPLY 

Article 14 

Priority Rated Orders 

1. 

Where at least three Member States, which have entered or are considering entering 
into  an  agreement  to  commonly  procure  relevant  defence  products  or  where  a 
Member  State  which  has  procured  or  is  considering  to  procure  for  the  purpose  of 

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transferring  acquired  relevant  defence  products  to  Ukraine,  face  severe  difficulties 
either in the placing of the order or in the execution of the contract due to shortages 
or serious risks of shortages of supply-critical defence products and these difficulties 
may undermine the security of the Union and of its Member States, those may ask 
the  Commission  to  require  an  undertaking  to  accept,  or  to  prioritise  an  order  of 
supply-critical defence products (‘priority rated order’), as defined in paragraph 3 of 
Article 13. 

2. 

Upon such request, the Commission may, after the consultation of the Member State 
of  establishment  of  the  concerned  undertaking  and  with  its  agreement,  notify  the 
latter of its intent to impose a priority rated order.  

The notification of the intent shall include information about its legal basis, specify 
the product, specifications and quantities concerned and the schedule and time-limit 
within which the order would have to be performed, and state the reasons justifying 
the use of the priority rated order. 

From  the  notification  of  the  intent,  the  undertaking  shall  reply  to  the  Commission, 
within five working days  and state whether it can accept  or not  the request.  Where 
the urgency of the situation requires it, the Commission may, based on a justification 
of such urgency, reduce the deadline for the undertaking to reply. 

Where the undertaking declines the request, it shall provide the Commission with a 
detailed explanation to the justification invoked to decline the intended request.  

Where the undertaking accepts the request, the order shall be deemed accepted under 
the  conditions  described  in  the  Commission’s  request  in  accordance  with  the 
meaning of paragraph 1 and the undertaking shall be legally bound.  

Where  the  notified  undertaking  declines  the  request,  the  order  shall  be  deemed 
refused.  Having  due  regard  to  the  justifications  invoked  by  the  undertaking,  the 
Commission  may,  in  agreement  with  the  Member  State  of  establishment  of  that 
undertaking: 

(a) 

(b) 

abstain from pursuing the request; 

adopt  an  Implementing  Act  obliging  the  concerned  undertakings  to  accept  or 
perform the priority rated order, at a fair and reasonable price. 

The  Commission  shall  take  into  account  the  objections  raised  by  the  undertaking 
under  paragraph  2  and  state  the  reasons  why,  in  line  with  the  proportionality 
principle  and  the  fundamental  rights  of  the  undertaking  under  the  Charter  of 
Fundamental  rights  of  the  Union,  it  was  necessary  to  adopt  it  in  light  of  the 
circumstances described in paragraph 1. 

The  Commission  shall state  in  the  Implementing  Act  the  legal  basis  of  the  priority 
rated order, fix the time-limit within which the order is to be performed, and set out 
the  product,  specifications,  volume,  and  any  other  parameter  to  be  complied.  The 
Commission  shall  also  state  the  penalties  provided  for  in  Article  15  for  non-
compliance with the obligation. 

3. 

4. 

5. 

Where the undertaking has accepted the request of the Commission under paragraph 
2 or where the Commission has adopted an Implementing Act under paragraph 3, the 
priority rated order shall:  

(a) 

be placed at a fair and reasonable price; 

(b) 

take precedence over any performance obligation under private or public law; 

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6. 

Where the undertaking has agreed to the request of the Commission under paragraph 
2 or where the Commission has adopted an Implementing Act under paragraph 3, the 
undertaking may request the Commission to review the priority rated order where it 
considers it to be duly justified based on one of the following grounds: 

(a) 

if  the  undertaking  is  unable  to  perform  the  priority  rated  order  on  account  of 
insufficient  production  capability  or  production  capacity,  even  under 
preferential treatment of the order; 

(b) 

if acceptance of the order would place an unreasonable economic burden and 
entail particular hardship for the undertaking. 

The undertaking shall provide all relevant and substantiated information to allow the 
Commission to assess the merits of the objections raised. 

Based on the examination of the reasons and evidence provided by the undertaking, 
the  Commission  may,  after  consulting  the  Member  State  concerned,  amend  its 
implementing Act to release, partially or in totality the undertaking concerned from 
its obligations under paragraph 2. 

For  the  purpose  of  this  Regulation,  transfers  of  supply-critical  defence  products 
subject to the priority rated order may not be considered as sensitive in the meaning 
of Article 4 (8) of Directive 2009/43/EC. 

When  an  undertaking  established  in  the  Union  is  subject  to  a  measure  of  a  third 
country which entails  a priority rated order, it shall notify the Commission  thereof. 
The Commission shall then inform the Committee of the existence of such measures. 

Where an undertaking  accepts  or is  obliged to  accept  and prioritise a priority  rated 
order in accordance with paragraphs 2 or 3 it shall be shielded from any contractual 
or extra-contractual liability in relation to comply with the priority rated orders. The 
liability shall be excluded only to the extent the violation of contractual obligations 
was necessary for compliance with the mandated prioritisation. 

The  Commission  shall  adopt  an  implementing  act  laying  down  the  practical  and 
operational arrangements for the functioning of priority rated orders. 

The  implementing  acts  referred  to  in  paragraphs  3  and  10  shall  be  adopted  in 
accordance  with  the  examination  procedure  referred  to  in  Article  22  (3).  On  duly 
justified  imperative  grounds  of  urgency  in  relation  with  the  supply  crisis,  the 
Commission  shall  adopt  immediately  applicable  implementing  acts  in  accordance 
with the procedure referred to in Article 22 (4)  

Article 15 

Penalties  

Where  an  undertaking,  intentionally  or  through  gross  negligence,  does  not  comply 
with  an  obligation  to  prioritise  priority  rated  orders  pursuant  to  Article  14,  the 
Commission  may,  by  decision,  where  deemed  necessary  and  proportionate,  impose 
periodic penalty payments. 

Periodic penalty payments shall not exceed 1.5 % of the average daily turnover in the 
preceding business year for each working day of non-compliance with the obligation 
calculated from the date established in the decision.  

7. 

8. 

9. 

10. 

11. 

1. 

2. 

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3. 

4. 

5. 

6. 

7. 

1. 

2. 

3. 

In  fixing  the  amount  of  the  periodic  penalty  payment,  regard  shall  be  had  to  the 
nature, gravity and duration of the infringement, taking due account of the principles 
of proportionality and appropriateness.  

Where  the  undertaking  has  satisfied  the  obligation  which  the  periodic  penalty 
payment was intended to enforce, the Commission may fix the definitive amount of 
the periodic penalty payment at a figure lower than that which would arise under the 
original decision.  

The  Court  of  Justice  of  the  European  Union  shall  have  unlimited  jurisdiction  to 
review  decisions  whereby  the  Commission  has  fixed  a  fine  or  a  periodic  penalty 
payment.  It  may  cancel,  reduce  or  increase  the  fine  or  periodic  penalty  payment 
imposed. 

Time  shall  begin  to  run  on  the  day  on  which  the  infringement  is  committed. 
However, in the case of continuing or repeated infringements, time shall begin to run 
on the day on which the infringement ceases. Any action taken by the Commission or 
the  competent  authorities  of  the  Member  States  for  the  purposes  of  ensuring 
compliance  with  the  provisions  of  this  Regulation  shall  interrupt  the  limitation 
period. Each interruption shall start the time running afresh. However, the limitation 
period  shall  expire  at  the  latest  on  the  day  in  which  a  period  equal  to  twice  the 
limitation  period  has  elapsed  without  the  Commission  having  imposed  a  periodic 
penalty  payment.  That  period  shall  be  extended  by  the  time  during  which  the 
limitation period is suspended because the decision of the Commission is the subject 
of proceedings pending before the Court of Justice of the European Union.  

The  power  of  the  Commission  to  enforce  decisions  taken  pursuant  to  this  Article 
shall be subject to a limitation period of three years. Time shall begin to run on the 
day on which the decision becomes final. The limitation period for the enforcement 
of periodic penalties payments shall be interrupted: (a) by notification of a decision 
varying the original amount periodic penalty payment or refusing an application for 
variation; (b) by any action of the Commission or of a Member State, acting at the 
request  of  the  Commission,  designed  to  enforce  payment  of  the  fine  or  periodic 
penalty  payment.  Each  interruption  shall  start  time  running  afresh.  The  limitation 
period  for  the  enforcement  of  periodic  penalty  payments  shall  be  suspended  for  so 
long  as:  (a)  time  to  pay  is  allowed;  (b)  enforcement  of  payment  is  suspended 
pursuant to a decision of the Court of Justice. 

Article 16 

Right to be heard for the imposition of fines or periodic penalty payments  

Before  adopting  a  decision  pursuant  to  Article  15,  the  Commission  shall  give  the 
undertaking concerned the opportunity of being heard on: (a) preliminary findings of 
the  Commission,  including  any  matter  to  which  the  Commission  has  taken 
objections;  (b)  measures  that  the  Commission  may  intend  to  take  in  view  of  the 
preliminary findings pursuant to point (a) of this paragraph.  

Undertakings  concerned  may  submit  their  observations  to  the  Commission’s 
preliminary findings within a time limit which shall be fixed by the Commission in 
its preliminary findings and which may not be less than 14 working days.  

The Commission  shall base its decisions only on objections on which undertakings 
concerned have been able to comment.  

EN 

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4. 

1. 

2. 

1. 

2. 

1. 

2. 

The  rights  of  defence  of  the  undertaking  concerned  shall  be  fully  respected  in  any 
proceedings.  The  undertaking  shall  be  entitled  to  have  access  to  the  Commission's 
file  under  the  terms  of  a  negotiated  disclosure,  subject  to  the  legitimate  interest  of 
undertakings in the protection of their business secrets. The right of access to the file 
shall  not  extend  to  confidential  information  and  internal  documents  of  the 
Commission or the authorities of the Member States. In particular, the right of access 
shall  not  extend  to  correspondence  between  the  Commission  and  the  authorities  of 
the  Member  States.  Nothing  in  this  paragraph  shall  prevent  the  Commission  from 
disclosing and using information necessary to prove an infringement.  

Article 17 

Acceleration of the permit-granting process for the timely availability and supply of 
relevant defence products  

Member States shall ensure that administrative applications related to  the planning, 
construction and operation of production facilities, intra-EU transfer of inputs as well 
as  qualification  and  certification  of  end  products  are  processed  in  an  efficient  and 
timely  manner.  To  that  end,  all  national  authorities  concerned  shall  ensure  that  the 
most rapid treatment legally possible is given to these applications. 

Member  States  shall  ensure  that  in  the  planning  and  permit-granting  process,  the 
construction and operation of plants and installations  for the production of relevant 
defence products  are  given priority when balancing legal  interests in  the  individual 
case. 

Article 18 

Continuity of production of relevant defence products  

Member States may decide to use or to encourage companies working in the field of 
relevant  defence  products  to  use  derogations  provided  for  in  Article  17(3)  of 
Directive 2003/88/EC in order to allow expansion of working shifts hence facilitating 
continuity  of  production  in  the  field  of  relevant  defence  products,  if  they  deem  it 
necessary to achieve the objectives of this regulation.  

To  that  end  and  where  prior  authorisation  is  required,  all  national  authorities 
concerned  shall  ensure  that  the  most  rapid  treatment  legally  possible  is  given  to 
applications from companies working in the field of relevant defence products to use 
such derogations. 

Article 19 

Facilitation of common procurement during the current ammunition supply crisis 

Where  at  least  three  Member  States  enter  into  an  agreement  to  commonly  procure 
relevant defence products and where the extreme urgency deriving from the current 
crisis  resulting  from  the  Russian  aggression  of  Ukraine  prevents  to  use  any  of  the 
procedures  provided  for  by  Directive  2009/81/EC  for  the  award  of  a  framework 
agreement, the following rules may be applied. 

By  way  of  derogation  from  Article  29(2)  second  subparagraph  of  Directive 
2009/81/EC,  a  contracting  authority  may  modify  an  existing  framework  agreement 
which has been awarded through one of the procedures provided for by Article 21 of 

EN 

33 

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Directive  2009/81/EC  so 
authorities/entities which are not originally party to the framework agreement. 

its  provisions  may  apply 

that 

to  contracting 

3. 

4. 

5. 

6. 

7. 

1. 

2. 

3. 

By  way  of  derogation  from  Article  29(2)  third  sub-paragraph  of  Directive 
2009/81/EC,  a  contracting  authority  may  make  substantial  amendments  to  the 
quantities  laid  down  in  an  existing  framework  agreement  insofar  as  it  is  strictly 
necessary  for  the  application  of  paragraph  2.  Where  quantities  laid  down  in  an 
existing framework agreement are substantially modified pursuant to this paragraph, 
the  contracting  authority  shall  open  the  possibility,  by  means  of  an  ad  hoc  notice 
published in  the Official Journal  of the European Union,  to  any  economic operator 
that meets the conditions initially laid down in the framework agreement, to join that 
framework agreement.  

The principle of non-discrimination shall apply to framework agreements referred to 
in  paragraph  2  and  3  with  regard  to  the  additional  quantities,  and  notably  between 
contracting authorities of Member States referred to in paragraph 1. 

Contracting  authorities  having  modified  a  contract  in  the  cases  set  out  under 
paragraphs 2 and 3 of this article shall publish a notice to that effect in the Official 
Journal  of  the  European  Union.  Such  notice  shall  be  published  in  accordance  with 
Article 32 of Directive 2009/81/EC.   

Contracting authorities/entities may not use this Article improperly or in such a way 
as to prevent, restrict or distort competition.  

Modifications introduced in the framework agreements referred to in this article shall 
not be concluded after 30 June 2025. 

Article 20 

Facilitation of intra-EU transfers of defence-related products  

By way of derogation from Article 4(1) of Directive 2009/43/EC, the transfer of the 
following  defence-related  products  between  Member  States  shall  not  be  subject  to 
prior authorisation: 

(a) 

ammunition  and  fuze  setting  devices,  and  specially  designed  components 
therefor,  as  listed  in  the  third  category  of  the  Annex  of  the  Directive 
2009/43/EC (third category of the EU Military List – ML3); 

(b)  missiles  and  related  equipment  and  accessories,  and  specially  designed 
components  therefor,  as  listed  in  the  fourth  category  of  the  Annex  of  the 
Directive 2009/43/EC (fourth category of the EU Military List – ML4). 

Any  transfer  in  accordance  with  the  derogation  set  out  in  paragraph  1  shall  be 
notified, for information, to the Member State of origin. 

This article does not affect the discretion of Member States as regards policy on the 
export of the defence-related products covered by paragraph 1. 

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SPECIFIC PROVISIONS APPLICABLE TO ACCESS TO FINANCE 

CHAPTER V 

Article 21 

Ramp-up Fund 

1. 

A  blending  facility  may  be  established,  to  be  described  as  the  ‘Ramp-up  Fund’ 
proposing  debt  solutions,  to  leverage,  de-risk  and  speed-up  investments  needed  to 
increase manufacturing capacities.  

2. 

The specific objectives pursued by the Ramp-up Fund are set out as follows: 

(a) 

improving  the  leverage  effect  of  the  Union  budget  spending  and  achieving  a 
higher multiplier effect in terms of attracting private-sector financing; 

(b)  providing  support  to  companies  facing  difficulties  in  accessing  finance,  and 
addressing the need to underpin the resilience of the Union’s defence industry; 

(c) 

accelerating investment in the field of manufacturing relevant defence products 
and to  leveraging  funding from both  the public and the private sectors, while 
increasing the security of supply for the whole Union’s defence industry value 
chain; 

(d) 

enhancing  access  to  finance  for  investments  related  to  activities  described  in 
points (a) to (e) of article 8(3). 

CHAPTER VI 

FINAL PROVISIONS 

Article 22 

Committee Procedure 

1. 

2. 

3. 

4. 

The  Commission  shall  be  assisted  by  a  committee.  That  committee  shall  be  a 
committee within the meaning of Regulation (EU) No 182/2011. 

The European Defence Agency shall be invited to provide its views and expertise to 
the  committee  as  an  observer.  The  European  External  Action  Service  shall  also  be 
invited to assist in the committee. 

Where  reference  is  made  to  this  paragraph,  Article  5  of  Regulation  (EU)  No 
182/2011 shall apply. 

Where  reference  is  made  to  this  paragraph,  Article  8  of  Regulation  (EU)  No 
182/2011, in conjunction with Article 5 thereof, shall apply. 

EN 

35 

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Article 23 

Security of Information 

The  Commission  shall  protect  classified  information  received  in  relation  to  the 
implementation  of  this  regulation  in  accordance  with  the  security  rules  set  out  in 
Commission Decision (EU, Euratom) 2015/44421. 

The Commission  shall make use of  existing or  set  up secured  exchange systems in 
order  to  facilitate  the  exchange  of  sensitive  and  classified  information  between  the 
Commission,  the  High  Representative,  the  European  Defence  Agency,  and  the 
Member States and, where appropriate, with the legal entities subject to measures set 
out  in  this  Regulation.  That  system  shall  take  into  account  the  Member  States’ 
national security regulations.  

Article 24 

Confidentiality and processing of the information  

Information  received  as  a  result  of  the  application  of  this  Regulation  shall  be  used 
only for the purpose for which it was requested. 

Member States and the Commission shall ensure the protection of trade and business 
secrets  and  other  sensitive  and  classified  information  acquired  and  generated  in 
application of this Regulation, including recommendations and measures to be taken, 
in accordance with Union and the respective national law. 

Member States and the Commission shall ensure that classified information provided 
or  exchanged  under  this  Regulation  is  not  downgraded  or  declassified  without  the 
prior written consent of the originator. 

The  Commission  shall  not  share  any  information  in  a  way  that  can  lead  to  the 
identification of an individual operator when the sharing of the information results in 
potential  commercial  or  reputational  damage  to  this  operator  or  in  divulging  any 
trade secrets. 

Article 25 

Personal data protection  

This  Regulation  shall  be  without  prejudice  to  the  obligations  of  Member  States 
relating to their processing of personal data under Regulation (EU) 2016/679  of the 
European Parliament and of the Council22 and Directive 2002/58/EC of the European 
Parliament and of the Council23 , or the obligations of the Commission  and, where 
appropriate,  other  Union  institutions  and  bodies,  relating  to  their  processing  of 

Commission Decision (EU, Euratom) 2015/444 of 13 March 2015 on the security rules for protecting 
EU classified information (OJ L 72, 17.3.2015, p. 53–88). 
Regulation  (EU)  2016/679  of  the  European  Parliament  and  of  the  Council  of  27  April  2016  on  the 
protection of natural persons with regard to the processing of personal data and on the free movement of 
such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (OJ L 119, 4.5.2016, 
p. 1–88). 
Directive 2002/58/EC of the European Parliament and of the  Council of 12 July 2002 concerning the 
processing  of  personal  data  and  the  protection  of  privacy  in  the  electronic  communications  sector 
(Directive on privacy and electronic communications) (OJ L 201, 31.7.2002, p. 37–47). 

1. 

2. 

1. 

2. 

3. 

4. 

1. 

21 

22 

23 

EN 

36 

  EN 

                                                 
2. 

3. 

personal data under Regulation (EU) 2018/1725 of the European Parliament and of 
the Council24, when fulfilling their responsibilities. 

Personal data shall not be processed or communicated except in cases where this is 
strictly necessary to the purposes of this Regulation. In such cases, the conditions of 
Regulation  (EU)  2016/679  and  Regulation  (EU)  2018/1725  shall  apply  as 
appropriate. 

Where  processing  of  personal  data  is  not  strictly  necessary  to  the  fulfilment  of  the 
mechanisms  established  in  this  Regulation,  personal  data  shall  be  rendered 
anonymous in such a manner that the data subject is not identifiable. 

Article 26 

Audits  

Audits on the use of the Union contribution  carried out  by  persons or entities, including by 
other  than  those  mandated  by  the  Union  institutions,  bodies,  offices  or  agencies,  shall  form 
the  basis  of  the  overall  assurance  pursuant  to  Article  127  of  the  Financial  Regulation.  The 
Court of Auditors shall examine the accounts of all revenue and expenditure of the Union in 
accordance with Article 287 TFEU. 

Article 27 

Protection of the financial interests of the Union  

Where  an  associated  country  participates  in  the  Instrument  by  means  of  a  decision  adopted 
pursuant to the Agreement on the European Economic Area, the associated country shall grant 
the necessary rights and access required for the authorising officer responsible, OLAF and the 
Court  of  Auditors  to  comprehensively  exercise  their  respective  competences.  In  the  case  of 
OLAF,  such  rights  shall  include  the  right  to  carry  out  investigations,  including  on-the-spot 
checks and inspections, as provided for in Regulation (EU, Euratom) No 883/2013. 

1. 

2. 

3. 

24 

Article 28 

Information, communication and publicity  

The  recipients  of  Union  funding  shall  acknowledge  the  origin  of  those  funds  and 
ensure the visibility of the Union funding, in particular when promoting the actions 
and  their  results,  by  providing  coherent,  effective  and  proportionate  targeted 
information to multiple audiences, including the media and the public.  

The Commission shall implement information and communication actions relating to 
the  Instrument,  to  actions  taken  pursuant  to  the  Instrument  and  to  the  results 
obtained. 

Financial  resources  allocated  to  the  Fund  shall  also  contribute  to  the  corporate 
communication of the political priorities of the Union, insofar as those priorities are 
related to the objectives referred to in Article 4. 

Regulation (EU) 2018/1725 of the European Parliament and of the Council of 23 October 2018 on the 
protection of natural persons with regard to the  processing of personal data by the Union institutions, 
bodies, offices and agencies and on the free movement of such data, and repealing Regulation (EC) No 
45/2001 and Decision No 1247/2002/EC (OJ L 295, 21.11.2018, p. 39–98). 

EN 

37 

  EN 

                                                 
4. 

1. 

2. 

Financial resources allocated to the Fund may also contribute to the organisation of 
dissemination  activities,  match-making  events  and  awareness-raising  activities,  in 
particular aiming at opening up supply chains to foster the cross-border participation 
of SMEs. 

Article 29 

Evaluation  

No  later  than  30  June  2024,  the  Commission  shall  draw  up  a  report  evaluating  the 
implementation of the measures set out in this Regulation and their results, as well as 
the opportunity to extend their applicability and provide for their funding, notably in 
regard of the evolution of the security context. The evaluation report shall build on 
consultations  of  the  Member  States  and  key  stakeholders  and  be  communicated  to 
the European Parliament and to the Council.  

Taking into account the evaluation report, the Commission may submit proposals for 
any  appropriate  amendments  to  this  Regulation,  notably  in  view  to  continue 
addressing  any  persisting  risks  in  relation  to  the  supply  of  the  relevant  defence 
products. 

Article 30 

Entry into force and application 

This  Regulation  shall  enter  into  force  on  the  day  following  that  of  its  publication  in  the 
Official Journal of the European Union. 

This  Regulation  shall  apply  until  30  June  2025.  This  shall  not  affect  the  continuation  or 
modification of actions initiated  pursuant  to  this Regulation,  all actions necessary to  protect 
the financial interests of the European Union and the powers conferred on the Commission to 
impose penalties in accordance with Article 15. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels, 

For the European Parliament 
The President 

For the Council 
The President 

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38 

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LEGISLATIVE FINANCIAL STATEMENT 

EN 

1 

  EN 

1. 

1.1. 

1.2. 

1.3. 

1.4. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE 

Title of the proposal/initiative 

Policy area(s) concerned 

The proposal/initiative relates to: 

Objective(s) 

1.4.1.  General objective(s) 

1.4.2. 

Specific objective(s) 

1.4.3.  Expected result(s) and impact 

1.4.4. 

Indicators of performance 

1.5. 

Grounds for the proposal/initiative 

1.5.1.  Requirement(s) to be met in the short or long term including a detailed timeline for 

roll-out of the implementation of the initiative 

1.5.2.  Added  value  of  Union  involvement  (it  may  result  from  different  factors,  e.g. 
coordination gains, legal certainty, greater effectiveness or complementarities). For 
the purposes of this point 'added value of Union involvement' is the value resulting 
from  Union  intervention,  which  is  additional  to  the  value  that  would  have  been 
otherwise created by Member States alone. 

1.5.3.  Lessons learned from similar experiences in the past 

1.5.4.  Compatibility  with  the  Multiannual  Financial  Framework  and  possible  synergies 

with other appropriate instruments 

1.5.5.  Assessment  of  the  different  available  financing  options,  including  scope  for 

redeployment 

1.6. 

Duration and financial impact of the proposal/initiative 

1.7.  Method(s) of budget implementation planned 

2. 

MANAGEMENT MEASURES 

2.1.  Monitoring and reporting rules 

2.2.  Management and control system(s) 

2.2.1. 

2.2.2. 

Justification of the management mode(s), the funding implementation mechanism(s), 
the payment modalities and the control strategy proposed 

Information concerning the risks identified and the internal control system(s) set up 
to mitigate them 

2.2.3.  Estimation and justification of the cost-effectiveness of the controls (ratio of "control 
costs ÷ value of the related funds managed"), and assessment of the expected levels 
of risk of error (at payment & at closure) 

2.3.  Measures to prevent fraud and irregularities 

3. 

3.1. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE 

Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget 
line(s) affected 

EN 

2 

  EN 

3.2. 

Estimated financial impact of the proposal on appropriations 

3.2.1. 

Summary of estimated impact on operational appropriations 

3.2.2.  Estimated output funded with operational appropriations 

3.2.3. 

Summary of estimated impact on administrative appropriations 

3.2.3.1.  Estimated requirements of human resources 

3.2.4.  Compatibility with the current multiannual financial framework 

3.2.5.  Third-party contributions 

3.3. 

Estimated impact on revenue 

EN 

3 

  EN 

1. 

FRAMEWORK OF THE PROPOSAL/INITIATIVE  

1.1. 

Title of the proposal/initiative 

Proposal for a Regulation of the European Parliament and of the Council establishing 
the Act in Support of Ammunition Production  

1.2. 

Policy area(s) concerned  

Union defence industrial policy   

1.3. 

The proposal/initiative relates to:  

 a new action  

 a new action following a pilot project/preparatory action25  

 the extension of an existing action  

 a merger or redirection of one or more actions towards another/a new action  

1.4. 

Objective(s) 

1.4.1.  General objective(s) 

The Act establishes a set of measures aimed at urgently strengthening the responsiveness 
and  ability  of  the  European  Defence  Technological  and  Industrial  Base  (EDTIB)  to 
ensure the timely availability and supply of ground-to-ground and artillery ammunition 
as well as missiles (hereafter “relevant defence products"), in particular through: 

 -  An  instrument  to  support  financially  defence  companies  producing  relevant  defence 
products through the value chain.  

- A mapping and continuous monitoring of relevant defence products, their components 
and critical inputs, in order to identify supply-critical defence products.  

-  Mechanisms,  principles  and  temporary  rules  to  facilitate  the  availability  of  relevant 
defence products for Member States.  

1.4.2. 

Specific objective(s) 

N/A 

1.4.3.  Expected result(s) and impact 

Specify the effects which the proposal/initiative should have on the beneficiaries/groups targeted. 

Expected  results:  The  Instrument  will  help  to  reinforce  the  European  Defence 
Technological  and  Industrial  Base  (EDTIB),  facilitate  its  adaptation  to  ongoing 
structural market changes, and thereby contribute to a timely availability and supply 
of    ground-to-ground  artillery    ammunition  as  well  as  missiles  (relevant  defence 
products).  Manufacturing  capacities  in  the  area  of  ground  to  ground  and  artillery 
ammunition, as well as missiles exist in the Union. However, production capacities 
have  been  tailored  for  peace  time,  with  a  modest  demand,  resulting  into  minimal 
level  of  stocks  and  diversified  suppliers  globally  to  reduce  costs,  exposing  the 
the  current 
Union’s  defence  sector 

to  dependencies.  As  a  consequence, 

25 

As referred to in Article 58(2)(a) or (b) of the Financial Regulation. 

EN 

4 

  EN 

 
                                                 
manufacturing capacity and the existing supply and value chains do not allow for a 
secure and timely delivery of defence products  to  meet  Member States’ needs both 
for  their  own  security  requirement  and  for  continuing  supporting  Ukrainian  needs.  
The financial contribution of the EU should contribute to unlock a number of actions 
which  urgently  need  to  take  place  in  order  to  ensure  the  timely  availability  and 
supply of relevant defence products to Member States. The European production is 
already  booked  at  almost  at  maximum  capacity  from  Member  States  or  third 
countries’  orders,  resulting  in  prices  spiralling.  Additional  EU  industrial  policy 
measures, in line with Article 173 (3), are therefore needed to support EU industry to 
increase  its  production,  reduce  its  delivery  lead-time  and  address  potential 
bottlenecks  that  could  delay  or  impede  the  supply  and  production  of    relevant 
defence products.  

Expected impact:  

A Union contribution of EUR 500 million would allow for an appropriate incentive 
for  economic  operators  involved  in  the  relevant  defence  products  manufacturing  to  
start  taking  measures  to  ramp-up  their  production  capacities  and/or  to  facilitate 
investment  thoughout  the  supply  chain.  It  will  contribute  to  reducing  lead  time  for 
the production of the relevant defence products while facilitating investment to allow 
the  industry  to  produce  more  and  faster.  It  will  also  support  industrial  cooperation 
and coordination of the sourcing of raw materials.  

As  a  consequence,  the  instrument  will  foster  the  competitiveness  of  the  European 
defence  industry  involved  in  the  production  of  these  products.  On  a  medium  to 
longer term, it is expected that additional investments in the EDTIB bring benefits as 
regards jobs creations and skills and enhance security of supply. 

1.4.4. 

Indicators of performance 

Specify the indicators for monitoring progress and achievements. 

Taking into consideration the short period of implementation, the results and impacts 
of  the  Instrument  will  be  assessed  under  retrospective  evaluation  at  the  end  of  the 
programme implementation. 

The Commission will ensure that the necessary indicators used for the monitoring of 
programme  implementation  will  be  put  in  place  by  the  entity  entrusted  with  the 
programme implementation. These will include: 

- increase of production capacity for relevant defence products within the EU 

- reduction of production lead time  

- number of economic operators receiving a facilitated access to finance 

- number of new cross-border cooperations with undertakings established in another 
Member States or associated countries  

1.5. 

Grounds for the proposal/initiative  

1.5.1.  Requirement(s) to be met in the short or long term including a detailed timeline for 

roll-out of the implementation of the initiative 

The  Regulation  will  be  implemented  through  direct  management.  The  Commission 
will need to be staffed with the appropriate experts in order to monitor effectively the 
implementation. 

EN 

5 

  EN 

1.5.2.  Added  value  of  Union  involvement  (it  may  result  from  different  factors,  e.g. 
coordination gains, legal certainty, greater effectiveness or complementarities). For 
the purposes of this point 'added value of Union involvement' is the value resulting 
from  Union  intervention  which  is  additional  to  the  value  that  would  have  been 
otherwise created by Member States alone. 

As  highlighted  by  the  Joint  Communication  on  Defence  Investment  gaps  and  way 
forward  (JOIN/2022/24  final),  decades  of  underinvestment  generates  gaps  within 
defence  capabilities  available  to  EU  Member  States  armed  forces,  as  well  as 
industrial  gaps  within  the  Union.  Fragmentation  of  the  demand  also  generated 
national  industrial  silos  and  a  corresponding  multitude  of  defence  systems  of  the 
same kind, often not interoperable amongst  each other. The current defence market 
context  is  marked  by  an  increased  security  threat,  sees  Member  States  rapidly 
increasing their defence  budgets  and aiming at  similar equipment’s purchases.  This 
results into an amount of demand for ground-to-ground artillery and ammunition, as 
well  as  missiles  which  overcomes  EDTIB  manufacturing  capacities  for  such 
products, currently tailored for peacetime. In this context, significant investments are 
needed for which defence companies, which do not normally engage substantial self-
funded industrial investments, will need de-risking, as well as regulatory support to 
remove existing bottlenecks such as access to skilled personnel,  raw materials. The 
Union intervention by de-risking industrial investments via grants will allow a faster 
adaptation  to  ongoing  structural  market  change.  The  proposed  measures  will  also 
encourage  the  EDTIB’s  resilience  through  cross-border  industrial  partnerships  and 
collaboration  of  relevant  companies  in  a  joint  industry  effort  to  avoid  worsening 
fragmentation of the supply chains.  

1.5.3.  Lessons learned from similar experiences in the past 

N/A 

1.5.4.  Compatibility  with  the  Multiannual  Financial  Framework  and  possible  synergies 

with other appropriate instruments 

The  Instrument  will  complement  planned  EU  instruments  such  as  the  European 
Defence Industry Reinforcement through common Procurement Act, and existing EU 
programmes  such  as  the  European  Defence  Fund  as  well  as  EU  defence  initiatives 
such as the Permanent Structured Cooperation (PESCO) or the Strategic Compass for 
Security and Defence. It will also generate synergies with other EU programmes.  

1.5.5.  Assessment  of  the  different  available  financing  options,  including  scope  for 

redeployment 

N/A 

EN 

6 

  EN 

  
  
1.6. 

Duration and financial impact of the proposal/initiative 

 limited duration  

–    in effect from 2023 to 30/06/2025  

–    Financial impact from 2023 to 2024 for commitment appropriations and from 

2023 to 2028 for payment appropriations.  

 unlimited duration 

–  Implementation with a start-up period from YYYY to YYYY, 

–  followed by full-scale operation. 

1.7.  Management mode(s) planned26  

 Direct management by the Commission 

–  by its departments, including by its staff in the Union delegations;  

–    by the executive agencies  

 Shared management with the Member States  

 Indirect management by entrusting budget implementation tasks to: 

–   third countries or the bodies they have designated; 

–   international organisations and their agencies (to be specified); 

–   the EIB and the European Investment Fund; 

–   bodies referred to in Articles 70 and 71 of the Financial Regulation; 

–   public law bodies; 

–   bodies governed by private law with a public service mission to the extent that 

they provide adequate financial guarantees; 

–   bodies governed by the private law of a Member State that are entrusted with 
the  implementation  of  a  public-private  partnership  and  that  provide  adequate 
financial guarantees; 

–    persons  entrusted  with  the  implementation  of  specific  actions  in  the  CFSP 

pursuant to Title V of the TEU, and identified in the relevant basic act. 

Comments  

The instrument shall be implemented in direct management in accordance with the Financial 
Regulation,  and  as  concerns  the  management  of  the  Ramp-up  Fund  of  Article  21, 
implementation maybe undertaken in indirect management with bodies referred to in Article 
61(1)(c) Regulation (EU, Euratom) 2018/1046. 

26 

Details of management modes and references to the Financial Regulation may be found on the 
BudgWeb site: 
https://myintracomm.ec.europa.eu/budgweb/EN/man/budgmanag/Pages/budgmanag.aspx  

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7 

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MANAGEMENT MEASURES  

2.1.  Monitoring and reporting rules  

Specify frequency and conditions. 

In  accordance  with  article  29  of  the  Instrument  the  Commission  will  draw  up  an 
evaluation report not later dan 30/06/2024 for the instrument and submit it to the EP 
and  Council.  The  report  shall  evaluate  the  impact  and  effectiveness  of  the  actions 
under  the  Instrument.  To  this  end,  the  Commission  will  put  in  place  necessary 
monitoring  arrangements  to  ensure  that  relevant  data  are  collected  reliably  and 
smoothly. 

2.2.  Management and control system(s)  

2.2.1. 

Justification of the management mode(s), the funding implementation mechanism(s), 
the payment modalities and the control strategy proposed 

The  Commission  would  have  overall  responsibility  for  the  implementation  of  the 
Instrument.  In  particular,  the  Commission  intends  to  implement  the  Instrument  in 
direct  management  (except  for  the  Ramp-up  Fund  which  could  be  implemented  in 
indirect  management).  The  use  of  direct  management  mode  clarifies 
the 
responsibilities (implementation by authorising officers), shortens the delivery chain 
(reducing Time To Grant and Time To Pay), avoids conflicts of interests and reduces 
the implementation costs (no management fees for an entrusted entity).  

The  Commission  should  define  the  funding  priorities  and  conditions  through  one 
multi-annual  work  programme.  The  definition  of  priorities  should  be  supported  by 
the work of the Defence Joint Procurement Task Force. A Programme Committee of 
Member States should be established, to which the European Defence Agency should 
be invited to provide its views and expertise to the committee as an observer, and the 
European External Action Service, including its Military Staff,  should be invited to 
assist  in  the  committee.  The  Commission  would  adopt  the  multi-annual  work 
programme following the opinion of the committee under the examination procedure. 

The funding under the Instrument will take the form of grants covering up to 100% 
of the costs of the action, as well as loans. The Commission may use simplified cost 
options (e.g. lump sums) in its grants in order to reduce the administrative burden for 
the beneficiaries and focus the effort on the results of the actions. 

The payment scheme will be prepared taking into account the beneficiary’s proposal 
(in  order  to  allow  the  beneficiary  to  avoid  any  treasury  issue)  while  ensuring  the 
protection  of  the  Union  budget.  The  Commission,  as  granting  authority,  may  –  in 
case  of  lack  of  or  inadequate  implementation  of  the  actions  or  delays  –  reduce, 
withhold or terminate its financial contribution. 

The control strategy for the programme, including ex-ante and ex-post controls, will 
build  around  the  experience  acquired  in  the  EDF,  and  its  precursor  programmes, 
EDIDP and PADR. 

2.2.2. 

Information concerning the risks identified and the internal control system(s) set up 
to mitigate them 

The Instrument is meant to support the ramp up of manufacturing capacity.  

EN 

8 

  EN 

 
Risks  associated  are  an  insufficient  budgetary  volume  compared  to  actual  needs, 
difficulty  to  identify  bottlenecks  within  production,  urgency  of  needs  by  Union’s 
armed  forces  compared  with  production  processes.  The 
instrument  being 
complementary  to  other  initiatives  agreed  by  the  Council  to  support  EU  Armed 
Forces  and  Ukraine,  coordination  of  demand  between  Member  States,  is  a 
precondition.  

The  Commission  would  therefore  implement  the  Instrument  in  direct  management 
building  on  the  expertise  gained  in  implementing  the  European  Defence  Fund, 
prepare and adopt only one multi-annual work programme, shorten the time to grant. 

2.2.3.  Estimation and justification of the cost-effectiveness of the controls (ratio of "control 
costs ÷ value of the related funds managed"), and assessment of the expected levels 
of risk of error (at payment & at closure)  

The budget of the programme will be implemented under direct management. Based 
on the Commission experience on grant management, the overall control costs of the 
Instrument  by  the  Commission  are  estimated  at  less  than  1%  of  the  related  funds 
managed.  

In  terms  of  expected  error  rate(s),  the  aim  is  to  maintain  the  error  rate  below  the 
threshold  of  2%.  The  Commission  considers  that  the  implementation  of  the 
programme in direct management, with trained (experienced staff, possibly recruited 
from  Member  States  Ministries  of  Defence)  and  well-staffed  teams  acting  under 
delegated authorising officers, applying clear rules and making an appropriate use of 
output-based  instruments  will  maintain  an  error  rate  below  the  2%  materiality 
threshold.  

2.3.  Measures to prevent fraud and irregularities  

Specify existing or envisaged prevention and protection measures, e.g. from the Anti-Fraud Strategy. 

The  European  Anti-Fraud  Office  (OLAF)  is  competent  to  carry  out  investigations  on 
operations  supported  under  this  initiative.  Agreements  resulting  from  this  Regulation, 
including  agreements  concluded  with 
international  organisations,  shall  provide  for 
supervision and financial control by the Commission, or any representative authorised by it, 
and  audits  by  the  European  Court  of  Auditors,  the  European  Public  Prosecutor’s  Office 
(EPPO)  or  OLAF,  if  necessary  on-the  spot.  Commission's  officials  who  have  the  required 
visits.
security 

clearance, 

make 

also 

site 

can 

on 

EN 

9 

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EN 

10 

  EN 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

3.1. 

Heading(s)  of  the  multiannual  financial  framework  and  expenditure  budget 
line(s) affected  

  Existing budget lines  

In order of multiannual financial framework headings and budget lines. 

Budget line 

Type of  
expenditure 

Contribution  

Heading of 
multiannual 
financial 
framework 

Number  

Diff./Non-
diff.27 

from 
EFTA 
countries
28 

from 
candidate 
countries 
and 
potential 
candidates
29 

fromother 
third 
countries 

other assigned 
revenue 

Diff./Non
-diff. 

YES/NO  YES/NO  YES/NO 

YES/NO 

  New budget lines requested  

In order of multiannual financial framework headings and budget lines. 

Heading of 
multiannual 
financial 
framework 

Number  

5 

5 

13.0105 

13.0602 

Budget line 

Type of 
expenditure 

Diff./Non-
diff. 

from 
EFTA 
countries 

Contribution  

from 
candidate 
countries 
and 
potential 
candidates 

from  
other 
third 
countries 

other assigned 
revenue  

No Diff 

YES 

Diff 

YES 

NO 

NO 

NO 

NO 

NO 

NO 

27 
28 
29 

Diff. = Differentiated appropriations / Non-diff. = Non-differentiated appropriations. 
EFTA: European Free Trade Association.  
Candidate countries and, where applicable, potential candidates from the Western Balkans. 

EN 

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3.2. 

Sources of financing and estimated financial impact of the Act in Support of Ammunition Production 

3.2.1. 

Source of financing of appropriations under the Act in Support of Ammunition Production 

2023 

2024 

2025 

2026 

2027 

Total 

EUR million (to three decimal places) 

EDIRPA 

157.000 

83.000 

EDF Capability 

EDF Research 

174.000 

86.000 

Total 

157.000 

343.000 

240.000 

174.000 

86.000 

500.000 

If  unexpected  budgetary  margins  would  materialise  for  the  years  2023  and  2024,  the  Commission  would  propose  to  the  budgetary 
authority to allocate it to the European Defence Fund up to €100 million. 

3.2.2. 

Summary of estimated impact on operational appropriations  

–    The proposal/initiative does not require the use of operational appropriations  

–    The proposal/initiative requires the use of operational appropriations, as explained below: 

Heading of multiannual financial  
framework  

5 

Security and Defence – Cluster 13 Defence 

EUR million (to three decimal places) 

Operational appropriations  

13.0602  Defence  Industrial  Reinforcement 
Instrument 

Commitments 

Payments 

(1) 

(2) 

Appropriations  of  an  administrative  nature  financed  from  the 

2023 

2024 

2025 

2026 

2027 

Post 2027 

TOTAL 

156.000  343.000 

500.000 

78.500  171.500 

54.950  120.050 

75.000 

500.000 

EN 

12 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
envelope of specific programmes30  

13.0105 Support expenditure to the Defence 
Industrial Reinforcement Instrument 

Commitments = 
Payments 

(3) 

1.000 

p.m. 

TOTAL appropriations  
under HEADING 5 
of the multiannual financial framework 

Commitments 

=1+3 

157.000  343.000 

500.000 

Payments 

=2+3 

1.000 

78.500  171.500 

54.950  120.050 

74.000 

500.000 

Heading of multiannual financial  
framework  

7 

‘Administrative expenditure’ 

EUR million (to three decimal places) 

2023 

2024 

2025 

2026 

2027 

Post 
2027 

TOTAL 

Human resources  

1.554 

2.500 

2.500 

2.158 

2.158 

1.801 

12.671 

Other administrative expenditure  

0.233 

0.288 

0.067 

0.067 

0.057 

0.052 

0.764 

TOTAL appropriations  
under HEADING 7 
 of the multiannual financial framework 

(Total commitments 
= Total payments) 

1.787 

2.788 

2.567 

2.225 

2.215 

1.853 

13.435 

30 

Technical and/or administrative assistance and expenditure in support of the implementation of EU programmes and/or actions (former ‘BA’ lines), indirect research, direct research. 

EN 

13 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
TOTAL appropriations  
under HEADINGS 1 to 7 
of the multiannual financial framework  

Commitments 

158.787  345.788 

2.567 

2.225 

2.215 

1.853 

Payments 

2.787 

81.288  174.067 

57.175  122.265 

75.853 

513.435 

513.435 

2023 

2024 

2025 

2026 

2027 

Post 
2027 

TOTAL 

EN 

14 

EN 

 
 
 
 
 
 
 
3.2.3. 

Summary of estimated impact on administrative appropriations  

–    The  proposal/initiative  does  not  require  the  use  of  appropriations  of  an 

administrative nature  

–    The proposal/initiative requires the use of appropriations of an administrative 

nature, as explained below: 

EUR million (to three decimal places) 

2023 

2024 

2025 

2026 

2027 

Post 2027 

TOTAL 

HEADING 7 
of the multiannual 
financial framework 

Human resources  

1.554 

2.500 

2.500 

2.158 

2.158 

1.801 

12.671 

0.233 

0.288 

0.067 

0.067 

0.057 

0.052 

0.764 

1.787 

2.788 

2.567 

2.225 

2.215 

1.853 

13.435 

Other administrative 
expenditure  

Subtotal HEADING 7 
of the multiannual 
financial framework  

Outside HEADING 7
of the multiannual 
financial framework  

31 

Human resources  

Other expenditure  
of an administrative 
nature 

Subtotal  
outside HEADING 7 
of the multiannual 
financial framework  

TOTAL 

1.787 

2.788 

2.567 

2.225 

2.215 

1.853 

13.435 

The  appropriations  required  for  human  resources  and  other  expenditure  of  an  administrative  nature  will  be  met  by 
appropriations from the DG that are already assigned to management of the action and/or have been redeployed within the 
DG.  together  if  necessary  with  any  additional  allocation  which  may  be  granted  to  the  managing  DG  under  the  annual 
allocation procedure and in the light of budgetary constraints. 

31 

Technical  and/or  administrative  assistance  and  expenditure  in  support  of  the  implementation  of  EU programmes 
and/or actions (former ‘BA’ lines), indirect research, direct research. 

EN 

15 

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3.2.3.1.  Estimated requirements of human resources  

–    The proposal/initiative does not require the use of human resources.  

–    The  proposal/initiative  requires  the  use  of  human  resources,  as  explained 

below: 

Estimate to be expressed in full time equivalent units 

2023 

2024 

2025 

2026 

2027 

Post 2027 

8 

13 

13 

11 

11 

10 

 Establishment plan posts (officials and temporary staff) 

20 01 02 01 (Headquarters and Commission’s Representation 
Offices) 

20 01 02 03 (Delegations) 

 External staff (in Full Time Equivalent unit: FTE)

32

20 02 01 (AC, END, INT from the ‘global envelope’) 

2 

3 

3 

3 

3 

1 

20 02 03 (AC, AL, END, INT and JPD in the delegations) 

XX 01  xx yy zz  

33

- at Headquarters 

- in Delegations  

01 01 01 02 (AC, END, INT - Indirect research) 

 01 01 01 12 (AC, END, INT - Direct research) 

Other budget lines (specify) 

TOTAL 

XX is the policy area or budget title concerned. 

10 

16 

16 

14 

14 

11 

The appropriations required for human resources and other expenditure of an administrative nature will be met by 
appropriations from the DG that are already assigned to management of the action and/or have been redeployed 
within the DG. together if necessary  with any additional allocation which may be granted to the managing DG 
under the annual allocation procedure and in the light of budgetary constraints. 

Description of tasks to be carried out: 

Officials and temporary staff 

External staff 

8 FTEs (8 AD) will be required to set up the Instrument in 2023 and to 
start up the first activities, including the mapping of economic actors in 
the supply chains of relevant defence products and the preparation of the 
work  programme;  13  FTEs  (10AD  and  3  AST)  to  implement  the 
activities  and  gradually  reducing  to  10  (8  AD  and  2  AST)  in  2028  to 
ensure  the 
  operational,  financial  and  legal  monitoring  of  the 
implementation of the projects (including closure). 

2 FTEs to start the activities (2 SNE), increasing to 3 (1 AC and 2 SNE) 
and then reduced to 1 in 2028 (1 AC) to ensure the operational, financial 
and  legal  monitoring  of  the  implementation  of  the  projects  (including 
closure). 

32 

33 

AC=  Contract  Staff;  AL  =  Local  Staff;  END=  Seconded  National  Expert;  INT  =  agency  staff; 
JPD= Junior Professionals in Delegations.  
Sub-ceiling for external staff covered by operational appropriations (former ‘BA’ lines). 

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3.2.4.  Compatibility with the current multiannual financial framework  

The proposal/initiative: 

–    can be fully financed through redeployment within the relevant heading of the 

Multiannual Financial Framework (MFF). 

Redeployment of appropriations from EDF and EDIRPA, both under Heading 5. Further details of the 
concerned lines and annual redeployment in Section 3.2.1 

–    requires use of the unallocated margin under the relevant heading of the MFF 

and/or use of the special instruments as defined in the MFF Regulation. 

–    requires a revision of the MFF. 

3.2.5.  Third-party contributions  

The proposal/initiative: 

–    does not provide for co-financing by third parties 

–    provides for the co-financing by third parties estimated below: 

Appropriations in EUR million (to three decimal places) 

Year 
N34 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as necessary 
to show the duration of the 
impact (see point 1.6) 

Total 

Specify  the  co-financing 
body  

TOTAL appropriations 
co-financed  

34 

Year N is the year in which implementation of the proposal/initiative starts. Please replace "N" by the 
expected first year of implementation (for instance: 2021). The same for the following years. 

EN 

17 

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3.3. 

Estimated impact on revenue  

–    The proposal/initiative has no financial impact on revenue. 

–    The proposal/initiative has the following financial impact: 

– 

– 

– 

 

 

on own resources  

on other revenue 

please indicate, if the revenue is assigned to expenditure lines  

Appropriations 
available for 
the current 
financial year 

Budget revenue line: 

Article …………. 

     EUR million (to three decimal places) 

Impact of the proposal/initiative35 

Year 
N 

Year 
N+1 

Year 
N+2 

Year 
N+3 

Enter as many years as necessary to show 
the duration of the impact (see point 1.6) 

For assigned revenue, specify the budget expenditure line(s) affected. 

Other  remarks  (e.g.  method/formula  used  for  calculating  the  impact  on  revenue  or  any  other 
information). 

35 

As regards traditional own resources (customs duties, sugar levies), the amounts indicated must be net 
amounts, i.e. gross amounts after deduction of 20 % for collection costs. 

EN 

18 

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