Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing the European Defence Industry Programme and a framework of measures to ensure the timely availability and supply of defence products (‘EDIP’)
Date: 2024-03-05
Institutions: Directorate-General for Defence Industry and Space, European Commission
Subjects: EU industrial policy, EU programme, European defence policy, European security, Ukraine, arms policy, common security and defence policy, defence budget, defence expenditure, investment, military cooperation, military equipment

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   EUROPEAN COMMISSION  Brussels, 5.3.2024  COM(2024) 150 final 2024/0061 (COD)  Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing the European Defence Industry Programme and a framework of measures to ensure the timely availability and supply of defence products (‘EDIP’) (Text with EEA relevance)  
 
EXPLANATORY MEMORANDUM 

1. 

• 

CONTEXT OF THE PROPOSAL 

Reasons for and objectives of the proposal 

On  24  February  2022,  Russia  launched  a  full-scale  military  invasion  of  Ukraine,  with 
devastating  consequences  for  Ukraine  and  its  people.  Two  years  of  intense  fighting,  heavy 
artillery  shelling  and  airstrikes  have  resulted  in  high  numbers  of  civilian  casualties  and 
immense  human  suffering.  Russia’s  war  of  aggression  has  caused  extensive  damage  to 
civilian and defence critical infrastructure, production capacities and services across Ukraine 
and the wholesale destruction of cities and towns in some parts of the country. The resulting 
humanitarian  crisis  has  displaced  millions  of  Ukrainians  from  their  homes  and  left  many  in 
desperate  need  of  food,  shelter  and  medical  assistance.  To  this  day,  Russian  aerial  strikes 
continue to attack targets throughout the country. It will take years, if not decades, to heal the 
trauma  of  this  senseless  war.  The  EU  supports  Ukraine’s  independence,  sovereignty  and 
territorial  integrity  within  its  internationally  recognised  borders,  its  inherent  right  of  self-
defence,  and  its  pursuit  of  a  comprehensive,  just  and  sustainable  peace  in  line  with 
international  law  and  the  UN  Charter.  Russia’s  war  of  aggression  against  Ukraine  poses  a 
fundamental threat not only to Ukraine but also to the European and global security. The EU’s 
contribution to Ukraine’s self-defence is a crucial investment in the EU’s own security. In this 
vein, the European Union and Member States will contribute, together with partners, to future 
security  commitments  to  Ukraine,  which  will  help  Ukraine  to  defend  itself,  resist 
destabilization efforts and deter acts of aggression in the future. There is no defence without a 
defence industry. Ukraine is heavily dependent on military support made available by the EU 
and its Member States, including due to its largely destroyed defence industrial base.  

Russia’s  military  aggression  against  Ukraine  has  marked  the  dramatic  return  of  territorial 
conflict and high-intensity warfare on European soil. The production capacity of the European 
Defence Technological and Industrial Base (EDTIB) has been 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.  Today,  for  many 
European  defence  companies  the  export  of  defence  equipment  to  non-EU  customers  is  a 
major  market. 

The surge of demand for certain defence products in Europe caused by the radically changed 
security  environment  happened  against  this  backdrop  of  an  EDTIB  constrained  by  limited 
“peace  time”  production  capacity.  On  the  long  run,  this  situation  raises  the  question  of 
defence industrial readiness in Europe, i.e. the capacity of the EDTIB to respond effectively 
(in  time  and  scale)  to  changes  in  European  demand  for  defence  products.  This  is  closely 
linked to the broader challenge of security of supply (SoS) of defence equipment in Europe. 
Although this topic is not new to EU Member States, the recent ammunition plan has put it in 
the  spotlight,  by  raising  the  question  of  the  EDTIB’s  ability  to  ensure  Europe’s  SoS  of 
defence equipment both in peace and war times. 

Following  the  outbreak  of  the  war  and  the  invitation  of  the  Versailles  declaration  of  March 
2022, in May 2022, the Commission, and the High Representative of the Union for Foreign 
Affairs  and  Security  Policy  (“the  High  Representative”)/Head  of  the  European  Defence 
Agency (EDA) adopted the Joint Communication on Defence Investment Gaps Analysis and 
Way  Forward  (JOIN/2022/24  final).  The  Joint  Communication  highlighted  that  the  past 

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decades of underinvestment in defence from Member States resulted into both capability and 
industrial gaps within the Union.  

Since the presentation of the Joint Communication of May 2022, several measures have been 
tabled  to  react  to  the  most  immediate  consequences  of  Russia’s  war  of  aggression  against 
Ukraine:   

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– 

– 

As  announced  in  the  Joint  Communication  of  May  2022,  the  Commission,  and  the 
High  Representative/Head  of  Agency  established  the  Defence  Joint  Procurement 
Task  Force  (DJPTF)  to  work  with  Member  States  to  support  the  coordination  of 
their very short-term procurement needs. The Task Force focused on de-confliction 
and coordination to avoid a race to secure orders. The Task Force also established an 
aggregate estimate of needs and mapped and highlighted  the need for expansion of 
the EU industrial manufacturing capacities necessary to answer the needs.  

Also,  as  announced  in  the  Joint  Communication  of  May  2022,  in  July  2022  the 
Commission  presented  the  European  Defence  Industrial  Reinforcement  through 
common  Procurement  Act  (EDIRPA),  aimed  at  incentivising  through  financial 
support, Member States’ cooperation on procurement of the most urgent and critical 
defence equipment. EDIRPA was adopted by co-legislators on 18 October 2023 and 
contributes  to  strengthen  the  adaptation  of  Union’s  defence  industry  to  structural 
market changes. EDIRPA will end on 31 December 2025. 

The  capability  gaps  highlighted  by  the  Joint  Communication  of  May  2022  were 
various, but in light of the evolution of the situation in Ukraine, a specific pressing 
need for ground-to-ground ammunition and artillery ammunition, as well as missiles 
emerged. This  was formally recognised by the Council, which agreed on 20 March 
2023 on a three-track approach for the delivery and joint procurement of ammunition 
for Ukraine. In this context, in May 2023 the Commission tabled a new proposal for 
a  Regulation  on  supporting  ammunition  production  (ASAP)  to  face  the  sudden 
surge of demand for these products and urgently enable their timely availability, by 
mobilising  EU  budget  to  support  investments  in  the  ramp  up  of  the  EDTIB’s 
production  capacities  in  this  field.  ASAP  was  adopted  by  co-legislators  on  20  July 
2023. It will end on 30 June 2025. 

The unlawful war of Russia against Ukraine not only raised urgent challenges for the EU and 
its  Member  States,  but  its  continuation  over  time  also  keeps  aggravating  structural  issues 
affecting  the  competitiveness  of  the  EDTIB  and  questions  its  ability  to  ensure  a  sufficient 
level  of  SoS  to  Member  States.  Hence,  the  EU  now  needs  to  move  from  punctual 
emergency  responses  (illustrated  by  the  above-described  measures)  to  EU  defence 
industrial readiness, from securing the availability of consumables in the requisite volumes 
during crisis times, to ensuring the timely delivery of tomorrow’s high end critical capabilities 
in the coming years. This is the exact purpose of the European defence industrial strategy 
(EDIS) presented on 5 March. In order to implement the orientations set out in EDIS as well 
as  the  actions  it  announces,  the  Commission  proposes  a  new  regulation  on  the  European 
defence  Industry  Programme  (EDIP).  Announced  by  the  Joint  Communication  of  May 
2022, and called for by the European Council, EDIP aims to  reconcile the urgent with the 
long  term,  by  maintaining  support  for  the  EDTIB  under  this  Multiannual  Financial 
Framework (MFF) and preparing for the EU’s defence industrial readiness for the future. In 
doing so, EDIP will translate in effect part of EDIS as its action is structured around 3 main 
pillars.  

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-  Strengthen the competitiveness and responsiveness of the EDTIB. In order to increase 
efforts to aggregate and harmonise European demand for defence equipment requirements 
from  the  EDTIB,  EDIP  proposes  a  ready-to-use  legal  framework,  the  Structures  for 
European  Armament  Programme (SEAP),  for  cooperating and jointly managing  defence 
equipment  throughout  its  life  cycle.  In  a  similar  logic,  EDIP  extends  the  EDIRPA  logic 
beyond  2025,  to  continue  to  defragment  and  harmonise  European  demand.  EDIP  also 
replicates  the  logic  of  ASAP  to  support  the  EDTIB’s  productive  investments,  helps  the 
EDTIB  to  move  towards  more  flexible  production  capacities,  as  well  as  ensures  the 
productization  phase  of  EDF  projects.  In  order  to  enhance  access  to  finance  for  the 
EDTIB,  EDIP  also  entails  the  establishment  of  a  fund  in  order  to  leverage,  de-risk  and 
speed-up  investments  needed  to  increase  the  defence  manufacturing  capacities  of  EU-
based SMEs and small mid-caps, building on the Commission’s experience of the ASAP 
“ramp up fund” as well as the successful set-up of the EUDIS’ defence equity facility.  
-  Enhance  the  ability  of  the  EDTIB  to  ensure  the  timely  availability  and  supply  of 
defence  products.  EDIP’s  aims  is  to  support  Member  States’  efforts  in  pursuing  the 
highest  possible  level  of  SoS  when  it  comes  to  defence  equipment,  by  creating  an  EU 
wide  SoS  regime.  The  latter  would  also  enhance  Member  State’s  trust  in  cross-border 
supply chains,  creating  at the same time  a key competitive advantage for  the EDTIB. A 
comprehensive crisis management framework would enable the coordination of responses 
to  possible  future  supply  crises  on  specific  defence  equipment  or  along  their  supply 
chains.  

-  Contribute  to  the  recovery,  reconstruction  and  modernisation  of  the  Ukraine 
Defence Technological and Industrial Base (Ukrainian DTIB). Ukraine’s current needs 
in military equipment far exceed its industrial production capacities while the EU and its 
Member States provide military assistance from their own - largely depleted – stocks and 
with  a defence industry  tailored for peace time.  In this context, both  industry’s  interests 
are  to  engage  in  a  more  in-depth  cooperation.  Failing  to  create  a  strong  relationship 
between the respective industrial bases may result in a missed business opportunity in the 
short-term  and  in  economic  and  strategic  dependencies  in  the  medium  to  long-term.  In 
view  of  Ukraine’s  future  accession  to  the  EU,  it  is  necessary  that  EDIP  enhances 
cooperation  with  Ukraine  at  industrial  level.  As  part  of  the  EU’s  future  security 
commitments  to  Ukraine1,  the  EU  should  foster  greater  cooperation  with  the  Ukrainian 
DTIB to boost its capacity to deliver for the immediate needs, as well as to work towards 
alignment  of  standards  and  improved  interoperability.  A  stronger  cooperation  with  the 
Ukrainian DTIB will contribute to  strengthen Ukraine’s  ability to  defend itself, and will 
benefit the EDTIB’s capacity to support both Member States’ and Ukraine’s needs. 

• 

Consistency with existing policy provisions in the policy area 

The support under EDIP will be consistent and complementary with existing collaborative EU 
initiatives in the field of defence industrial policy and with other forms of bilateral support for 
Ukraine  provided  through  other  EU  instruments,  including  the  Ukraine  Facility.  It  will 
complement,  the  EU’s  main  programme  in  this  policy  area,  the  European  Defence  Fund 
(EDF),  notably  by  supporting,  at  a  later  stage  of  the  life-cycle  of  defence  equipment,  the 
EDF’s projects,  thereby  helping the future market  uptake of  the programme’s results.  EDIP 
will  also  build  on  the  experience  acquired  in  the  context  of  other  EU  programmes,  such  as 
EDIRPA  or  ASAP,  in  particular  by  extending  their  financial  support  logic  and  expanding 

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Framework  on  the  EU’s  future  Security  Commitments  to  Ukraine,  endorsed  by  the  Council  on  27 
November 2023. 

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their  scope  to  other  types  of  equipment.  It  will  finally  consolidate  the  efforts  and  dialogue 
undertaken as part of the DJPTF. 

• 

Consistency with other Union policies 

EDIP  will  generate  synergies  with  the  EU  defence  policy  and  the  implementation  of  the 
Strategic Compass for Security and Defence. It will 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.  EDIP  will  also  facilitate 
Member  States  cooperation  efforts  in  the  Permanent  Structured  Cooperation  (PESCO) 
framework.  It  should  serve  the  implementation  of  PESCO  projects,  and  contribute  to  speed 
up, ease and support the fulfilment of the more binding commitments undertaken by Member 
States  in  this  context.  EDIP  will  complement  the  European  Defence  Agency’s  (EDA)  pre-
existing  action in  the field  of SoS. EDIP will also build notably upon EDA’s Key Strategic 
Activities work strand to inform discussions held in the framework of the Defence Industrial 
Readiness Board. EDIP  will also  be implemented in  full consistency with  the EU’s military 
assistance to Ukraine in the context of the European Peace Facility (EPF). EDIP will usefully 
complement  the  objectives  of  recovery  and  reconstruction  pursued  by  the  EU  under  the 
Ukraine  Facility, notably by strengthening  Ukraine’s ability to  defend itself by relying on  a 
resilient and responsive DTIB. More broadly, 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. 

By  providing  an  EU-wide  SoS  Regime  through  notably  a  two-tier  crisis  framework,  EDIP 
will complement the Internal market emergency and resilience act’ (IMERA), which does not 
concern  defence  products.  Measures  available  to  the  Commission  within  the  EDIP  crisis 
framework  for  certain  non-defence  products  critical  for  the  supply  of  defence  products 
identified as having priority only aims at ensuring that concerned defence supply chains may 
access,  as  a  matter  of  priority,  the  components  and  materials  required  for  ensuring  an 
adequate level of SoS at EU level. 

2. 

• 

LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY 

Legal basis 

EDIP  establishes  a  set  of  measures  and  lays  down  a  budget  aimed  at  supporting  defence 
readiness  of  the  Union  and  its  Member  States  through  the  strengthening  of  the 
competitiveness, responsiveness and ability of the EDTIB to ensure the timely availability and 
supply  of  defence  products  and  at  contributing  to  the  recovery,  reconstruction  and 
modernisation of the Ukrainian DTIB. Hence the regulation relies on 3 different legal bases:  

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Article 173 TFEU in relation to the competitiveness of the EDTIB 

Article 114 TFEU in relation to the European Defence Equipment Market (EDEM) 

Article 212 TFEU in relation to the strengthening of the Ukrainian DTIB 

Article 322 TFEU in relation to the financial provisions. 

To reflect these multiple legal bases, EDIP is structured around 3 pillars, each corresponding 
to one of the legal bases of this regulation. 

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– 

– 

The first pillar is composed of measures to ensure that the conditions necessary for 
the competitiveness of the EDTIB exist, the appropriate legal basis for such measures 
is Article 173. As described in the EDIS, Russia’s unlawful war of aggression against 
Ukraine has drastically and structurally modifed the security environment in Europe 
which  results  into  a  new  market  situation  for  the  EDTIB.  Yet  two  years  after  the 
outbreak  of  Russia’s  unjustified  war  in  Ukraine,  the  EDTIB  still  needs  to  adapt  to 
this  new  reality.  Also,  as  stated  in  the  EDIS,  the  EDTIB  needs  to  adopt  a  flexible 
production apparatus, able to adapt and adjust to the evolution of European demand. 
Hence, in line with Article 173 paragraph 1, the Commission can take action aiming 
at speeding up the adjustment of the defence industry to structural changes. Measures 
like  the  extension  of  the  EDIRPA  and  ASAP  logic,  the  set-up  of  the  SEAP  legal 
framework as well as the establishment of the fund will aim at helping the EDTIB to 
adapt  to  the  new  market  reality.  Finally,  according  to  Article  173  paragraph  2,  the 
Commission  may  take  any  useful  initiative  to  promote  coordination  amongst 
Member States in the field of defence industrial policy.  

The second pillar is composed of measures which have as their object the functioning 
of  the  internal  market  and  in  particular  the  EDEM,  the  appropriate  legal  basis  for 
such  measures  is  Article  114.  Ensuring  the  public  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.  As 
described in  the EDIS, the current  geopolitical  context results in  a general  increase 
for  defence  equipment  and  potential  future  peak  of  demand  for  specific  defence 
products  in  the  Union  and  possibly  at  global  scale.  This  situation  affects  the 
functioning  of  internal  market  for  these  products  and  threatens  their  security  of 
supply.  Member  States  are  primarily  responsible  to  ensure  their  military  SoS,  as  a 
matter  of  national  defence.  However,  as  explained  in  the  EDIS,  there  is  an 
increasingly  European  dimension  to  SoS.  Also,  notably  as  illustrated  in  the  supply 
crisis of ammunition addressed by ASAP, divergent national legislation, in particular 
regarding the certification of defence products and divergent approaches to national 
security have proven to be bottlenecks for European defence products supply chains 
and obstacles to interoperability. Therefore, ensuring the functioning of the internal 
market,  by  avoiding  shortages  of  defence  products  in  the  Union,  can  be  best 
addressed through Union harmonising legislation based on Article 114 of the Treaty. 
The  set-up  of  an  EU-wide  SoS  regime  for  defence  equipment  relies  on  several 
aspects.  Firstly,  EDIP  includes  measures  to  enhance  the  preparedness  of  Member 
States in the new geopolitical context characterized notably by the need to replenish 
stocks  and  further  expand  defence  capabuilities  as  soon  as  possible.  EDIP  notably 
includes  measures  to  simplify  the  re-opening  of  existing  and  future  framework 
contracts with the EDTIB  to other Member States. Secondly, EDIP entails measures 
to  perform  an  identification  and  monitoring  of  critical  products  and  industrial 
capacities  in  the  supply  chains  of  certain  defence  products.  Finally,  when  a  supply 
crisis  arises,  EDIP  provides  for  a  modular  and  gradual  crisis  management 
framework, with the possibility given to the Board to decide on the most appropriate 
mode  of  crisis  management  and,  for  the  more  serious  crises,  on  measures  to  be 
activated.  Hence,  EDIP  will  ensure  that  supply  disruption  are  well  anticipated  and 
addressed  without  delay  in  order  to  preserve  the  functioning  of  the  internal  market 
and ensure an adequate level of SoS for Member States.  

– 

The third pillar is composed of measures contributing to the recovery, reconstruction 
and  modernisation  of  the  Ukrainian  DTIB  and  progressive  integration  into  the 
EDTIB.  The  appropriate  legal  basis  for  such  measures  is  Article  212.  Special 

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attention  shall  be  given  to  the  objective  to  support  Ukraine  to  progressively  align 
with  Union  rules,  standards,  policies  and  practices  (‘acquis’)  with  a  view  to  future 
Union  membership.  With  this  third  pillar,  the  Union's  operations  will  complement 
and reinforce those of the Member States. 

Other  articles  of  the  TFEU  or  each  article  on  its  own  cannot  justify  the  three  of  the  above 
pillars and the measures they entail. 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 industrial readiness. 

• 

Subsidiarity (for non-exclusive competence)  

Member States critically rely on the capacity of the EDTIB to meet the needs of their armed 
forces in time and scale. The size of damages caused to Ukraine and to the Ukraine defence 
industrial base by Russia’s war of aggression is such that Ukraine will require extensive and 
sustained support that no Member State  can provide alone. It is therefore key to ensure that 
both the EDTIB and the Ukrainian DTIB are capable of performing this strategic role. Action 
at European level appears to be the most suitable in this area.  

As for the support to the competitiveness of the EDTIB:  

– 

– 

– 

The Union and its Member States are faced on one side with a brutal change of their 
security  environment  resulting  in  an  increase  of  European  demand  for  defence 
equipment,  and  on  the  other  side  an  EDTIB  constrained  by  limited  “peace  time” 
production capacity.  If this  situation persists over the long  term, it will  continue to 
structurally affect and worsen the competitiveness of the EDTIB. Although at lower 
tier levels, the EDTIB’s supply chains tend to span across borders, the latter remains 
structurally  divided  along  national  lines  in  the  higher  tier  levels.  This  results  from 
EU  Member  States’  demand  for  defence  equipment,  which,  despite  its  recent 
increase, remains fundamentally fragmented and thereby deprives the EDTIB of the 
benefits of a trully functional EU defence market. Member States never achieved the 
total  defence  equipment 
collective  benchmark  of  dedicating  35%  of 
procurement to European  collaborative procurement, that they set for themselves in 
2007. This demonstrates that Member States face considerable difficulties preventing 
them  from  increasing  their  joint  procurement  of  defence  equipment.  Therefore,  the 
Union is best placed to take measures to incentivise aggregation and harmonisation 
of EU demand for defence equipment, as well as to facilitate Member States’ long-
term cooperation throughout the life cycle of defence equipment.  

their 

Also, lack of coordination and over-concentration of Member States’ demand on the 
same  type  of  defence  products,  in  the  same  time-frame,  and  possibly  coupled  with 
shortages  of supplies, would result in spiralling prices  and  crowding-out effect  (i.e. 
difficulties for Member States with more limited purchasing power to secure required 
defence items). Therefore, by preventing potential conflicts between parallel national 
procurement  efforts,  measures  put  in  place  at  European  level  to  aggregate  EU 
Member States’ demand, will also strengthen solidarity between Member States.  

Uncoordinated demand also reduces the visibility of market trends. In turn, the lack 
of visibility and predictability of European demand hampers the capacity of industry 
to invest, in a sector that is entirely demand driven. Yet, pressed by a new security 
environment,  the  Union  cannot  afford  to  wait  until  the  EDTIB  has  sufficient 
predictability  of  orders  to  invest  in  adapting  its  production  capacity.  The  European 

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defence industry needs to adapt  as  quickly as possible to  the new market situation. 
This  means  that  there  is  a  need  to  support  de-risking  industry’s  investments  in 
flexible manufacturing capacities. An intervention of this type at Member State level 
only could lead to inbalances in the geographical distribution of investment and in an 
increase  of  the  fragmentation  of  supply  chains.  The  European  level  would  also 
appear  to  be  the  most  appropriate  for  taking  action  to  de-risk  investment  in  the 
EDTIB,  throughout  the  Union  and  with  a  view  to  helping  the  sector  develop  a 
flexible production apparatus. 

It is also important for the EDTIB’s competitiveness to capitalise on the results of the 
EDF,  both  in  terms  of  products  or  technologies  resulting  from  the  programmes’ 
projects, and of the opening up of supply chains achieved thanks to them. However, 
several  issues  might  hamper  or  even  deter  common  procurement  of  end  products 
stemming  from  EDF  R&D.  This  means  that  EDF  project  results  may  face  a  new 
‘commercialisation gap’ in their post R&D phases that Member States alone cannot 
address.  The  Union  is  best  positioned  to  take  action  to  ensure  that  collaborative 
efforts initiated under EDF continue beyond the R&D phase.  

– 

As for the SoS of defence equipment in Europe:  

-  Even  though  defence  SoS  has  been  primarily  defined  at  Member  State’s  level  since 
defence is a national competence, there is an increasingly European dimension to SoS, as 
industrial supply chains increasingly span across the EU internal market and beyond. This 
is in particular true for critical components and raw materials on which Member States are 
also  increasingly  interdependent.  Also  as  illustrated  by  the  ammunition  plan,  Member 
States  have  little  visibility  on  the  overall  capacities  and  of  the  supply  chains  of  the 
EDTIB, preventing them from making informed decisions. Therefore, in order to ensure a 
sufficient level of SoS, including in crisis time, it is appropriate to envisage at Union level 
the establishment of an EU-wide SoS regime under EDIP. Such framework will enhance 
the  coordination  of  responses  to  supply  crises  of  defence  products  and  Member  States’ 
trust  in  cross-border  supply  chains,  as  well  as  strenghtening  the  EDTIB’s  resilience,  for 
the  benefit  of  all  Member  States,  in  a  more  effective  way  than through  a  patchwork  of 
parallel national measures. 

As for the strengthening of the Ukrainian DTIB: 

-  The  Ukraine’s  defence  industry  is  a  strategically  important  sector  of  the  Ukrainian’s 
economy. The country is seeking to maintain and increase its production capacity to meet 
its national defence equipment needs. However, the scale of damage caused by Russia’s 
war of aggression to the Ukrainian DTIB infrastructures is such that Ukraine will require a 
specific  support  that  no  Member  State  could  provide  alone.  Measures  proposed  under 
EDIP will directly strengthen the Ukrainian DTIB and enhance its industrial cooperation 
with the EDTIB.  With EDIP, the EU is in a unique position to encourage in time and at 
scale  both  DTIBs  to  meet  in  a  joint  effort  the  needs  of  Ukraine  and  of  Member  States.  
With  its  presence  on  the  ground  in  Ukraine  through  its  Delegation,  the  EU  can  ensure 
comprehensive access to information on developments affecting the country. The EU is a 
major actor in the field of military assistance provided to Ukraine and also  participates in 
most of the multilateral processes aimed at addressing defence challenges that Ukraine is 
facing.  This  allows  the  EU  to  be  constantly  aware  of  new  needs  in  terms  of  defence 
equipment  and  circumstances  of  Ukraine’s  defence  production  capacities  and,  therefore, 
to adapt support according to evolving needs, coordinating closely with other national or 
industrial  stakeholders.  The  objective  of  preparing  candidate  countries  and  potential 
candidates for Union membership can also be best addressed at Union level. 

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• 

Proportionality 

The  proposal  complies  with  the  proportionality  principle  in  that  it  does  not  go  beyond  the 
minimum  required  to  achieve  the  stated  objectives  at  the  European  level  and  which  is 
necessary for that purpose. 

In  view  of  the  unprecedented  geopolitical  situation  and  the  significant  threat  for  security  of 
the  Union,  the  proposed  policy  approach  is  proportionate  to  the  scale  and  gravity  of  the 
problems  that  have  been  identified.  The  need  to  support  the  adjustment  of  industry  to 
structural  changes,  enhance  the  EU’s  SoS  for  defence  equipment,  and  strengthen  the 
Ukrainian  DTIB  are  adequately  addressed,  within  the  limits  of  possible  Union  intervention 
under the Treaties. The measures set out in EDIP do not go beyond what is strictly necessary 
to achieve their objectives, are proportionate to the scale and gravity of the problems that have 
been  identified  to  those  objectives.  The  financial  support  to  various  actions  aiming  at 
reinforcing  the  competitiveness  of  the  industry  within  a  system  of  open  and  competitive 
markets. The support to the Ukrainian DTIB is based on the extension of the logic of existing 
support  to  Ukraine  and  constitutes  a  targeted  response  to  the  specific  circumstances  of 
Ukraine due to the Russian war of aggression. 

• 

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  uniform  application, 
binding nature and direct applicability, can provide the necessary degree of uniformity needed 
to  strengthen  the  defence  industrial  readiness  across  Europe  and  ensure  the  SoS  of  defence 
products in Europe. In addition, this is in line with Article 114, 173 and 212 of the Treaty on 
the Functioning of the European Union, which all set out the ordinary legislative procedure to 
be used to adopt measures in their respective fields of application. 

3. 

• 

RESULTS 
CONSULTATIONS AND IMPACT ASSESSMENTS 

EX-POST 

EVALUATIONS, 

OF 

STAKEHOLDER 

Stakeholder consultations 

A formal stakeholder consultation could not be carried out due to the urgency of preparing the 
proposal  so  that  it  can  be  adopted  in  a  timely  manner  by  the  co-legislators  to  render  it 
operational  as  of  beginning  of  2025,  when  new  needs  will  have  to  be  met  relating  to  the 
geopolitical  situation  as  well  as  for  recovery  and  reconstruction  of  the  Ukraine  defence 
industrial base. 

The  Commission,  in  close  cooperation  with  the  High  Representative,  has  conducted  a 
comprehensive  consultation  process  with  Member  States,  Industry,  the  financial  sector  and 
think  tanks  to  inform  the  work  on  the  EDIS.  The  consultation  was  based  on  contributions 
from stakeholders during events (workshops, meetings) and written contributions.. Ahead of 
these  workshops,  the  Commission  shared  issue  papers  (publicised  on  the  website  of  the 
European Commission), notably covering thematics pertaining to EDIP’s measures, to serve 
as a basis for the discussion during the events. Those same issue papers also served as a basis 
for  the  written  contributions  that  were  shared  by  the  consulted  stakeholders  with  the 
Commission  and  the  High  Representative.  Any  EU  citizen  willing  to  take  part  in  the 
consultation was invited to send a written contribution to a dedicated email address. In total, 
more than 270 written contributions from over 90 different stakeholders have been sent to the 
Commission  and  the  High  Representative  and  have  been  analysed  to  feed  the  preparatory 
work  of  EDIS.  A  meeting  with  Ukraine’s  representatives  has  also  been  organised  and  the 
latter have also shared written contributions to express their views on the upcoming EDIS.  

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EDIP’s purpose being to start implementing the vision developed in EDIS and translating into 
effect actions anounced in this strategy, the inputs received in the context of EDIS, have been 
largely  taken  into  account  to  devise  EDIP’s  measures.  In  broad  terms,  the  inputs  received 
related to the main actions of EDIP  can be described as followed:  

– 

– 

– 

– 

on the support to the EDTIB’s adaptation to the structural changes resulting from the 
new security situation, most stakeholders were supportive of the idea. The extension 
of  ASAP  and  EDIRPA  intervention  logic  as  well  as  the  need  to  capitalise  on  the 
results  of  the  EDF  were  often  seen  positively.  These  mostly  converging  positions 
have been considered by the Commission, as illustrated, inter alia, by the proposal of 
measures to expand the logic of ASAP and EDIRPA and to ensure the market uptake 
of EDF products.  

On SoS, most stakeholders underlined the importance of the issue at EU level. Most 
of contributions also underlined that a satisfactory balance should be struck between 
the need to improve SoS at EU level and the respect of Member States’ sovereignty 
and  prerogatives  in  the  field  of  defence.  In  order  to  strike  such  a  balance,  the 
Commission  notably  proposes  a  gradual  and  proportionate  regime  for  SoS,  where 
Member  States  are  fully  and  constantly  involved,  and  where  industry’s  economic 
interests are duly considered and proportionately protected.  

On  the  mainstreaming  of  a  defence  industrial  readiness  culture,  most  stakeholders 
consulted  aknowledged  the  need  to  ensure  a  sufficient  access  to  finance  for  the 
defence  sector  and  in  particular  for  SMEs  active  in  the  EDTIB.  The  Commission 
paid particular attention to the views expressed in this regard, notably by proposing 
the  Fund  to  Accelerate  defence  Supply-chains  Transformation  (FAST)  which  by 
design will benefit SMEs and small mid-caps.  

On  the  cooperation  with  Ukraine  on  defence  industrial  matters,  most  stakeholders 
were sympathetic to the idea. The Commission has taken into account stakeholders’ 
inputs  as  well  as  Ukraine’s  views  to  tailor  in  the  most  appropriate  way  dedicated 
actions under EDIP. 

The EU will ensure  appropriate  communication  and visibility around the objectives  and the 
actions  delivered  within  the  scope  of  this  Regulation,  within  the  Union,  in  Ukraine  and 
beyond. 

• 

Collection and use of expertise 

The  EDIS  comprehensive  consultation  has  enabled  the  Commission  and  the  High 
Representative,  to  receive  a  large  number  of  inputs  from  different  types  of  experts  (e.g. 
National administration experts, defence industry experts, financial sector experts, think tank 
experts, Academics). The expertise gathered by the Commission and High Representative in 
the context of EDIS has been used to developped the measures proposed under EDIP. 

• 

Impact assessment 

Due to the urgent nature of the proposal, which is designed to support the rapid adaptation of 
the European defence industry to the new geopolitical environment and provide assistance to 
a country at war as of beginning of 2024, no impact assessment could be carried out. 

The  geopolitical  context  and  in  particular  the  continuation  in  time  of  Russia’s  military 
aggression  against  Ukraine,  led  the  Commission  to  decide  to  quickly  move  from  adopting 
punctual emergency responses in July (i.e. ASAP) and October (i.e. EDIRPA) 2023, to taking 

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a  more  structural  approach  to  address  the  long-term  consequences  faced  by  the  EDTIB  and 
continue to support Ukraine.  

In addition, the European Council called in its Conclusions of 14 and 15 December 2023 to 
“swiftly” present a proposal for the EDIP and indicated in its Conclusions of 1 February 2024 
that it “will revert to the matter of security and defence, including Europe’s need to increase 
its overall defence readiness and further  strengthen its  defence technological and industrial 
base, at its next meeting in March 2024, with a view to agreeing on further steps to make the 
European defence industry more resilient, innovative and competitive”.  

Hence, it was not possible to deliver an impact assessment in the timeframe available to table 
an EDIP proposal in time for the discussion that will take place at the European Council of 
March 2024. However, the EDIP proposal draws on the work undertaken in the framework of 
the DJPTF, on the early lessons learned from the implementation of ASAP and EDIRPA, and 
builds on the comprehensive consultation  process that has been  conducted in  the context  of 
EDIS. Within 3 months after the publication of this regulation proposal, the Commission will 
publish a Staff working document to present the justification for this legislative EU action and 
explain its appropriateness to achieve the identified policy objectives.  

• 

Regulatory fitness and simplification 

EDIP is not expected to increase the administrative burden. The proposed performance-based 
approach  available  for  its  eligible  actions,  relying  on  the  conditionality  between  the 
disbursement of payments and the achievement of milestones and targets by the  consortium, 
is also an element of simplification in the implementation of the instrument. 

• 

Fundamental rights 

Enhancing the security of EU citizens can contribute to safeguarding their fundamental rights. 

Also,  actions  related  to  defence  common  procurement  of  goods  or  services,  which  are 
prohibited  by  applicable  international  law,  shall  not  be  eligible  for  support  from  the 
Programme. Moreover, actions with a view to the common procurement of lethal autonomous 
weapons without the possibility for meaningful human control over selection and engagement 
decisions when carrying out strikes against humans shall not be eligible for support from the 
EDIP. 

In  addition,  Article  16  of  the  Charter  of  Fundamental  Rights  of  the  European  Union  (‘the 
Charter’) provides for the freedom to conduct a business. Nevertheless, some measures under 
pillar 2 needed to  ensure the SoS of defence equipment in  the Union 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, and comply with the principle of proportionality. 

– 

– 

First  EDIP  entails  provisions  on  requests  for  information  and  prioritization 
mechanisms  (priority  rated  orders  and  priority  rated  requests)  which  are  strictly 
conditional  on  the  activation  of  the  most  appropriate  crisis  mode  through  the 
adoption of a Council implementing act when it comes to a supply crisis mode and 
when it comes to a security-related supply crisis mode.  

Second, the obligation to disclose specific information to the Commission, provided 
the  essence  of  and  will  not 
that  certain  conditions  are  met, 
disproportionately  affect  the  freedom  to  conduct  a  business  (Article  16  of  the 

respects 

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– 

Charter).  Any  information  request  serves  the  objective  of  general  interest  of  the 
Union  to  enable  the  information  gathering  about  the  production  capabilities, 
production  capacities  and  primary  disruptions  of  potential  mitigation  measures  to 
shortages  affecting  the  production  of  crisis-relevant  products  or  defence  products. 
These  information  requests  are  appropriate  and  effective  to  attain  the  objective  by 
providing information strictly 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  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 for information may only 
be  launched  for  crisis-relevant  defence  products,  raw  materials  or  components 
thereof, that are specifically identified by the Commission through an implementing 
act, and that are affected by disruptions or potential disruptions leading to significant 
shortages. 

Third, 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 serves the objective of general interest of the Union 
to  address crisis-relevant 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  crisis-relevant  products  idenfied  as 
affected  by  a  supply  crisis,  it  is  proportionate  to  oblige  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  crisis-relevant  products  that  are 
specifically identified, by the Commission and through an implementing act, and that 
are  affected  by  disruptions  or  potential  disruptions  leading  to  significant  shortages. 
The undertaking concerned may request the Commission to review the priority rated 
order  if  it  is  unable  to  perform  the  order  or  if  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. 

4. 

BUDGETARY IMPLICATIONS 

The financial envelope  for the implementation  of the Regulation  for the  period from period 
XX XX XXXX to 31/12/2027 shall be EUR 1 500 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. 

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5. 

• 

OTHER ELEMENTS 

Implementation plans and monitoring, evaluation and reporting arrangements 

The Commission should draw up an evaluation report for the Programme and communicate it 
to  the  European  Parliament  and  to  the  Council  no  later  than  30/6/2027.  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  with  a  view  to 
addressing  any  persisting  risks  hampering  the  defence  industrial  readiness  of  the  EU  or  in 
relation to the security of supply of defence products in Europe. 

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2024/0061 (COD) 

Proposal for a 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

establishing the European Defence Industry Programme and a framework of measures 
to ensure the timely availability and supply of defence products (‘EDIP’) 

(Text with EEA relevance) 

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 
Article 114(1), Article 173(3), Article 212(2) and Article 322(1) 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,  
Having regard to the opinion of the European Court of Auditors3, 

Acting in accordance with the ordinary legislative procedure, 

Whereas: 

(1) 

(2) 

(3) 

The Heads of State or Government of the Union, meeting in Versailles on 11 March 
2022,  committed  to  “bolster  European  defence  capabilities”  in  light  of  Russia’s 
unprovoked  and  unjustified  war  of  aggression  against  Ukraine.  They  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  EU  defence  industry,  including  through  establishing  a  European 
Defence Industry Programme (the ‘Programme’). 

The long-term deterioration of regional and global threat levels requires a step-change 
in the scale and speed with which Europe’s defence technological and industrial base 
(EDTIB) can develop and produce the full spectrum of military capabilities. The return 
of high-intensity warfare and territorial conflict to Europe has a negative impact on the 
security of the Union and the Member States and requires a significant increase in the 
capacity of Member States to reinforce their defence capabilities. 

On  14  and  15  December  2023,  the  European  Council,  in  its  conclusions,  having 
considered work carried out to implement the Versailles declaration and the Strategic 
Compass for Security and Defence, underlined that more needs to be done to fulfil the 
Union’s  objectives  of  increasing  defence  readiness.  To  achieve  such  a  readiness  and 
defend  the  Union,  a  strong  defence  industry  is  a  pre-requisite,  making  the  European 
defence industry more resilient, innovative and competitive. 

2 
3 

OJ C , , p. . 
OJ C , , p. . 

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(4) 

(5) 

(6) 

(7) 

4 

5 

The  Commission  and  the  High  Representative  of  the  Union  for  Foreign  Affairs  and 
Security  Policy  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.  On  18  October  2023  a 
Regulation (EU) 2023/2418 of the European Parliament and the Council4 was adopted 
establishing  an  instrument  for  the  reinforcement  of  the  European  defence  industry 
through common Procurement (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 Russia’s war of aggression against Ukraine, 
in a collaborative way. On 20 July 2023 a Regulation (EU) 2023/1525 of the European 
Parliament and the Council5 supporting ammunition production (ASAP) was adopted, 
aimed at urgently supporting 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.  

EDIRPA  and  ASAP  were  designed  as  emergency  response  and  short-term 
programmes, both expiring in 2025 (30 June 2025 for ASAP and 31 December 2025 
for EDIRPA). The Programme should build on EDIRPA and ASAP achievements and 
extend their logic until 2027, by providing financial support for the reinforcement of 
the  EDTIB,  in  a  predictable,  continuous  and  timely  manner  on  the  basis  of  an 
integrated approach. In the light of the current security situation, it appears necessary 
to  extend  the  Union  support  a  broader  scope  of  defence  equipment  including 
consumables such as unmanned systems that play a decisive role in the war theatre in 
Ukraine. 

The  European  Council  of  23  June  2022  decided  to  grant  the  status  of  candidate 
country to Ukraine, which expressed a strong will to link reconstruction with reforms 
on  its  European  path.  In  December  2023,  EU  leaders  decided  to  open  accession 
negotiations with Ukraine. On 15 December 2023, the European Council declared that 
the Union and Member States remain committed to contributing, for the long term and 
together with partners, to security commitments to Ukraine, which will help Ukraine 
to defend itself, resist destabilization efforts and deter acts of aggression in the future. 
Strong support to Ukraine is a key priority for the Union and an appropriate response 
to  the  Union’s  strong  political  commitment  to  support  Ukraine  for  as  long  as 
necessary. 

The damage from Russia’s war of aggression to the Ukrainian economy, society and 
infrastructure,  and  in  particular  damage  caused  to  the  Ukraine  defence  technological 
and  industrial  base  (Ukrainian  DTIB)  require  comprehensive  support  to  rebuild  the 
latter.  This  is  essential  in  order  to  provide  the  capacity  to  the  Ukrainian  State  to 
maintain  its  essential  functions  and  allow  the  fast  recovery,  reconstruction  and 
modernisation  of  the  country  and  foster  its  integration  into  the  European  Defence 
Equipment Market. A strong Ukrainian DTIB is vital for Ukraine’s long-term security 
as well as its reconstruction. 

Regulation  (EU)  2023/2418  of  the  European  Parliament  and  of  the  Council  of  18  October  2023  on 
establishing  an  instrument  for  the  reinforcement  of  the  European  defence  industry  through  common 
procurement (EDIRPA) (OJ L, 2023/2418, 26.10.2023, ELI: http://data.europa.eu/eli/reg/2023/2418/oj). 
Regulation  (EU)  2023/1525  of  the  European  Parliament  and  of  the  Council  of  20  July  2023  on 
7,  ELI: 
supporting 
http://data.europa.eu/eli/reg/2023/1525/oj). 

ammunition 

production 

24.7.2023, 

(OJ  L 

(ASAP) 

185, 

p. 

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(8) 

(9) 

In  this  regard  actions  supporting  the  reinforcement  of  the  Ukrainian  defence 
technological  and industrial  base should be financed. This  support is complementary 
to  that  provided  under  the  Ukraine  Facility  as  well  as  military  support  provided  to 
Ukraine  under  the  European  Peace  Facility  and  through  bilateral  assistance  by 
Member States. 

Russia must be held fully accountable and pay for the massive damage caused by its 
war of aggression against Ukraine, which constitutes a blatant violation of the Charter 
of the United Nations. The Union and its Member States should, in close cooperation 
with  other  international  partners,  continue  to  work  towards  this  goal,  in  accordance 
with  Union  and  international  law,  taking  into  account  Russia’s  serious  breach  of  the 
prohibition on the use of force enshrined in Article 2(4) of the Charter of the United 
Nations  and  the  principle  of  State  responsibility  for  internationally  wrongful  acts, 
including the obligation to compensate for the financially assessable damage caused. It 
is  important  that,  inter  alia,  progress  is  made,  in  coordination  with  international 
partners,  on  how  extraordinary  revenues  held  by  private  entities  stemming  directly 
from  immobilised  Russian  assets  could  be  directed  to  support  Ukraine,  including  its 
defence  technological  and  industrial  base,  in  a  manner  that  is  consistent  with 
applicable contractual obligations and in accordance with Union and international law. 
If the Council were to adopt a CFSP decision under Article 29 TEU upon a proposal 
by  the  High  Representative  to  transfer  to  the  Union  extraordinary  cash  balances  of 
central securities depositories arising from the unexpected and extraordinary revenues 
from  Russia’s immobilised sovereign  assets,  such additional support  could  be drawn 
from these revenues, in line with the objectives of the Union’s Common Foreign and 
Security Policy. 

(10)  A Framework agreement should be concluded with Ukraine to set up the principles of 
the  cooperation  between  the  Union  and  Ukraine  under  this  Regulation.  Grant 
agreements  or  joint  procurement  should  also  be  concluded  with  Ukraine  and  legal 
entities established in Ukraine to define conditions for releasing funds.  

(11)  To fund the actions that aim at strengthening the competitiveness, responsiveness and 
ability of the EDTIB based on Article 173 TFEU and the actions of cooperation with 
Ukraine  for  reinforcement  of  the  Ukrainian  DTIB  under  Article  212  TFEU,  this 
Regulation should establish common objectives, common financial mechanisms while 
clearly  distinguishing  two  budget  lines  corresponding  to  each  of    the  objectives 
pursued  as  well  as  establish  a  Programme  setting  out  the  conditions  for  Union 
financial support under Article 173 TFEU and an Ukraine Support Instrument setting 
out the specific conditions for Union financial support under Article 212 TFEU. 

(12)  This  Regulation  lays  down  a  financial  envelope  for  the  entire  duration  of  the 
Programme which is to constitute the prime reference amount, within the meaning of 
point  18  of  the  Interinstitutional  Agreement  of  16  December  2020  between  the 
European  Parliament,  the  Council  of  the  European  Union  and  the  European 
Commission  on  budgetary  discipline,  on  cooperation  in  budgetary  matters  and  on 
sound  financial  management,  as  well  as  on  new  own  resources,  for  the  European 
Parliament and the Council during the annual budgetary procedure.  

(13)  The  possibilities  provided  for  in  Article  73(4)  of  Regulation  (EU)  2021/1060  of  the 
European  Parliament  and  of  the  Council  could  be  applied  provided  that  the  project 
complies  with  the  rules  set  out  in  that  Regulation  and  the  scope  of  the  European 
Regional  Development  Fund  and  the  European  Social  Fund  Plus  as  set  out  in 
Regulations (EU) 2021/1058 and (EU) 2021/1057 of the European Parliament and of 

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(14) 

the Council, respectively. 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. In line with Article 24 of Regulation (EU) 2021/1060, 
the Commission is to assess the amended programmes submitted by the Member State 
and  make  observations  within  two  months  of  the  submission  of  the  amended 
programme.  

In view of the need invest  better and together in  defence capabilities of the Member 
States  and  associated  countries  as  well  as  in  the  recovery,  reconstruction  and 
modernisation of Ukraine’s defence industrial base, it should be possible for Member 
States,  third  countries,  international  organisations,  international  financial  institutions 
or  other  sources  to  contribute  to  the  implementation  of  the  Programme.  Such 
contributions should be implemented in accordance with the same rules and conditions 
and  should  constitute  external  assigned  revenue  within  the  meaning  of  Article 
21(2)(a)(ii), (d), and (e) of the Regulation (EU, Euratom) No 2018/1046. In addition, 
Member  States  should  be  able  to  use  the  flexibility  in  the  implementation  of  their 
shared  management  allocations  offered  by  Regulation  (EU)  2021/1060  of  the 
European  Parliament  and  the  Council.  It  should  therefore  be  possible  to  transfer 
certain levels of funding between shared management allocations and the Programme 
subject  to  the  conditions  set  out  in  the  relevant  provisions  of  Regulation  (EU) 
2021/1060 of the European Parliament and the Council. Uncommitted resources at the 
latest in 2028 may be transferred back to one or more respective source programmes, 
at  the  request  of  the  Member  State,  in  accordance  with  the  conditions  set  out  in  the 
relevant provisions of Regulation (EU) 2021/1060. 

(15)  As the Programme aims to enhance the competitiveness and efficiency of the Union’s 
and Ukraine’s defence industry, to benefit from the Programme, recipients of financial 
support  should  be legal  entities  which  are  established  in  the  Union,  in  associated 
countries  or  in  Ukraine  and  which  are  not  subject  to  control  by  non-associated  third 
countries,  other  than  Ukraine  or  by,  non-associated  third-country  entities.  Where 
Member  States,  associated  countries  or  Ukraine  are  the  recipients  of  the  financial 
support,  in  particular  for  common  procurement  actions,  these  rules  should  apply 
mutatis mutandis for the contractors or subcontractors to the procurement contracts. 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. Additionally, in order to ensure the protection of essential security and 
defence  interests  of  the  Union  and  its  Member  States,  the  infrastructure,  facilities, 
assets and resources of the legal entities involved in the actions which are used for the 
purposes  of  the  action should be  located  on  the  territory  of  a  Member  State,  of  an 
associated country or of Ukraine. 

(16) 

In certain circumstances, it should be possible to derogate from the principle that legal 
entities involved in an action supported by the Programme are not subject to control by 
non-associated third countries or non-associated third-country entities. In that context, 
a legal entity established in the Union or in an associated third country and controlled 
by  a  non-associated  third  country  or  a  non-associated  third  country  entity  may 
participate as recipient if 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 

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(TEU), including  in  terms of strengthening the European Defence Technological  and 
Industrial Base, are fulfilled. 

(17)  Furthermore,  the  defence  products  subject  to  actions  supported  by  the  Programme 
should  not  be  subject  to  control  or  restriction  by  a  non-associated  third  country  or  a 
non-associated third country entity. 

(18)  Given  the  specificities  of  the  defence  industry,  where  demand  comes  almost 
exclusively from States, 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. The industry does not therefore 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  offsetting  the  complexity  of  cooperation  for  common  procurement 
and de-risking industrial investments via grants and loans allowing a faster adaptation 
to ongoing structural market change. As a general rule, Union support should cover up 
to  100%  of  direct  eligible  costs  or  100%  of  the  amount  determined  for  actions 
applying  the  financing  not  linked  to  costs  option.  The  Union  support  for  industry 
reinforcement  actions  should  cover  up  to  50  %  of  direct  eligible  costs  in  order  to 
enable recipients to implement actions as soon as possible, to de-risk their investment 
and therefore to speed up the availability of relevant defence products. 

(19)  The  Programme  should  provide  financial  support,  via  means  provided  for  in  the 
Regulation  (EU,  Euratom)  No  2018/1046,  to  actions  contributing  to  the  timely 
availability  and  supply  of  defence  products  such  as  cooperation  for  common 
procurement  of  public  authorities,  industrial  coordination  and  networking  activities 
including  reservation  and  stockpiling  of  defence  products,  access  to  finance  for 
undertakings involved in the manufacturing of relevant defence products, reservation 
of  manufacturing  capacities  (‘ever  warm  facilities’), 
industrial  processes  of 
reconditioning of expired products, expansion, optimisation, modernisation, upgrading 
or repurposing of existing, or the establishment of new, production capacities in that 
field as well as the training of personnel.  

(20)  Grants under the Programme may take the form of financing not linked to cost based 
on the achievement of results by reference to work packages, milestones or targets of 
the common procurement process, in order to create the necessary incentive effect. 

(21)  Where  the  Union  grant  takes  the  form  of  financing  not  linked  to  costs,  the 
Commission should determine in the work programme the funding conditions for each 
action,  in  particular  (a)  a  description  of  action  involving  cooperation  for  common 
procurement with a view to addressing the most urgent and critical capacity needs, (b) 
the  milestones  for  the  implementation  of  the  action  and  (c)  the  maximum  Union 
contribution available. 

(22) 

In  order  to  ensure  uniform  conditions  for  the  implementation  of  this  Regulation, 
implementing  powers  should  be  conferred  on  the  Commission  with  respect  to  the 
adoption  of  work  programmes  to  set  out  the  funding  priorities  and  the  applicable 
funding  conditions.  The  specificities  of  the  defence  sector,  in  particular  the 
responsibility of Member States, associated countries or Ukraine for the planning and 
acquisition process, should be taken into account. Those powers should be exercised in 
accordance with Regulation (EU) No 182/2011 of the European Parliament and of the 
Council. 

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(23) 

In accordance with Article 193(2) of the Regulation (EU, Euratom) No 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, costs incurred prior to the date of submission of the grant 
application  are  not  eligible,  except  in  duly  justified  exceptional  cases.  In  order  to 
enable continuity of funding perspective for actions that could have been supported by 
2024  funding  under  ASAP  and  EDIRPA,  in  the  financing  decision  it  should  be 
possible to provide for financial contributions in relation to actions that cover a period 
starting from 5 March 2024. 

(24)  When  assessing  proposals  submitted  by  applicants,  the  Commission  should  pay 
particular  attention  to  their  contribution  to  the  objectives  of  the  Programme.  The 
proposals should be assessed, in particular, against their contribution to the increase in 
defence  industrial  readiness,  in  particular  increasing  production  capacities  and 
eliminating  bottlenecks.  They  should  also  be  assessed  against  their  contribution  to 
fostering  defence  industrial  resilience,  by  reference  to  considerations  such  as  timely 
availability and supply to all locations, strengthening security of supply throughout the 
Union  in  response  to  identified  risks,  including  in  particular  to  those  Member  States 
most  exposed  to  the  risk  of  materialisation  of  conventional  military  threats. 
Assessments  should  also  refer  to  the  contribution  to  defence  industrial  cooperation 
through  genuine  armament  cooperation  among  Member  States,  associated  countries 
and  Ukraine  and  the  development  and  the  operationalisation  of  cross-border 
cooperation of undertakings, in particular, to a significant extent, small and medium-
sized enterprises (SMEs) and small middle capitalization companies (small mid-caps) 
operating in the supply chains concerned. 

(25)  When  designing,  awarding  and 

the 
Commission  should  pay  particular  attention  to  ensuring  that  such  support  does  not 
adversely affect the conditions of competition in the internal market. 

implementing  Union  financial  support, 

(26)  The Regulation (EU, Euratom) No 2018/1046 and subsequent amendments applies to 
this  Programme.  It  lays  down  rules  on  the  implementation  of  the  Union  budget, 
including  the  rules  on  grants,  prizes,  procurement,  indirect  implementation,  and 
financial instruments. 

(27) 

In  accordance  with  the  Regulation  (EU,  Euratom)  No  2018/1046,  Regulation  (EU, 
Euratom)  No  883/2013  of  the  European  Parliament  and  of  the  Council  and  Council 
Regulations  (EC,  Euratom)  No  2988/95,  (Euratom,  EC)  No  2185/96  and  (EU) 
2017/1939,  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  Parliament  and  of  the  Council.  In  accordance  with  the  Regulation  (EU, 
Euratom)  No  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 

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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. 

(28)  Third  countries  which  are  members  of  the  European  Economic  Area  (EEA)  may 
participate  in  Union  programmes  in  the  framework  of  the  cooperation  established 
under  the  Agreement  on  the  European  Economic  Area,  which  provides  for  the 
implementation  of  the  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.  Pursuant  to  Article  85  of  Council  Decision 
(EU)  2021/1764  (18),  natural  persons  and  bodies  and  institutions  established  in 
overseas  countries and territories (OCTs) are eligible for funding subject to the rules 
and objectives of the Programme and possible arrangements applicable to the Member 
State to which the relevant OCT is linked. 

(29)  Building inter alia on the experience of the defence equity facility, established in the 
context  of  the  European  Defence  Fund  as  an  InvestEU  blending  operation,  the 
Commission should endeavour to set up a dedicated facility as part of the Programme 
to  be  referred  to  as  the  ‘Fund  for  the  acceleration  of  defence  supply  chain 
transformation (‘FAST’)’. FAST should be implemented under indirect management. 
FAST will leverage, de-risk and speed-up investments needed to increase the defence 
manufacturing  capacities  of  EU-based  SMEs  and  small  mid-caps,  in  the  form  of  a 
blending operation offering support in the form of debt and/or equity. FAST should be 
established  as  a  blending  operation,  including  under  the  InvestEU  Programme 
established  by  Regulation  (EU)  2021/523  of  the  European  Parliament  and  Council 
(20), in close cooperation with its implementing partners.  

(30)  FAST should achieve a  satisfactory multiplier effect in line with the debt and equity 
mix  and  contribute  to  attracting  both  public  and private-sector  financing.  In  order  to 
contribute to the overall objective of enhancing the EDTIB’s competitiveness, FAST 
should  also  provide  support  to  SMEs  (including  start-ups  and  scale-ups)  and  small 
mid-caps across the EU, manufacturing defence technologies and products as well as 
companies  actually  or  potentially  part  of  the  defence  industry’s  supply  chain,  facing 
difficulties  in  accessing  finance.  FAST  should  as  well  accelerate  investment  in  the 
field of manufacturing defence technologies and products, and therefore strengthen the 
security of supply of the Union’s defence industry value chains. 

(31)  Cooperative  armament  programmes  in  the  Union  face  significant  challenges,  being 
mostly  set  up  on  ad  hoc  basis  and  being  plagued  by  complexity,  delays  and  cost 
overruns.  To  remediate  this  situation  and  ensure  continuous  Member  States’ 
commitment throughout the whole life cycle of defence capabilities, a more structured 
approach  is  required  at  EU  level.  To  make  this  happen,  the  Commission  should 
support  Member  States’  efforts  by  making  available  a  new  legal  framework  –  the 
Structure  for  European  Armament  Programme  (SEAP)  -  to  underpin  and  strengthen 
defence  cooperation.  Actions  undertaken  in  this  framework  should  be  mutually 
reinforcing  with  those  carried  out  under  the  Common  Foreign  and  Security  Policy 
(CFSP), in particular in the context of the Capability Development Plan (CDP) and of 
PESCO 

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(32)  Within  this  Structure  for  European  Armament  Programme,  Member  States  should 
benefit from standardised procedures for initiating and managing cooperative defence 
programmes. A cooperation  under this framework should also  allow Member States, 
under  certain  conditions,  to  benefit  from  an  increased  funding  rate,  simplified  and 
harmonised  procurement  procedures,  and,  where  Member  States  jointly  own  the 
procured  equipment,  a  VAT  exemption.  The  international  organisation  status  should 
also  allow  Member  States,  if  they  wish  so,  to  issue  bonds  to  ensure  the  long-term 
financing plan of armament programmes. While the Union would not be liable for debt 
issuance  by  Member  States,  contributions  under  EDIP  to  the  functioning  of  SEAP 
might  improve  the  conditions  for financing  by  the  Member  States  of  the  armament 
programmes, which are eligible for Union support.   

(33) 

In order to permit an efficient procedure for the setting-up of a SEAP, it is necessary 
for  the  Member  States,  associated  countries  or  Ukraine  willing  to  set  up  a  SEAP  to 
submit an application to the Commission which should assess, whether the proposed 
statutes of the armament programme are in conformity with this Regulation. Such an 
application  should  contain  a  declaration  of  the  host  Member  State  recognising  the 
SEAP  as  an  international  body  or  organisation  for  the  purpose  of  the  application  of 
Council Directive 2006/112/EC of 28 November 2006 on the common system of value 
added  tax  and  Council  Directive  (EU)  2020/262  of  19  December  2019  laying  down 
the general arrangements for excise duty, as of its setting up. 

(34)  For  reasons  of  transparency,  the  decision  setting-up  a  SEAP  should  be  published  in 
the Official  Journal  of  the  European  Union.  For  the  same  reasons,  the  essential 
elements of its Statutes should be annexed to such decisions. 

(35) 

In  order  to  carry  out  its  tasks  in  the  most  efficient  way,  a  SEAP  should  have  legal 
personality  and  the  most  extensive  legal  capacity  as  from  the  day  on  which  the 
decision setting it up takes effect. It should have a statutory seat, in order to determine 
the applicable law, within the territory of a member of that SEAP which is a Member 
State. 

(36)  Membership of a SEAP should comprise at least three Member States and may include 

associated countries and Ukraine. 

(37)  For the implementation of the SEAP, more detailed provisions should be laid down in 
Statutes, on the basis of which the Commission should examine the compliance of an 
application with the rules established in this Regulation. 

(38) 

It is necessary to ensure that, on the one hand, a SEAP has the necessary flexibility to 
amend its Statutes and, on the other hand, that certain essential elements, in particular 
those  which  were  necessary  for  the  granting  of  the  SEAP  statutes,  are  preserved 
through  a  necessary  control  at  Union  level.  If  an  amendment  concerns  an  essential 
element of the Statutes annexed to the decision setting up the SEAP, such amendment 
should be approved, prior to taking effect, by a Commission decision taken following 
the same procedure as that for setting up the SEAP. Any other amendment should be 
notified to the Commission, which should have an opportunity to object if it considers 
the amendment contrary to this Regulation. 

(39)  A  SEAP  should  be  able  to  appoint  a  Procurement  Agent  acting  in  its  own  name.  A 
SEAP should be able to procure defence products on its own behalf or on behalf of its 
members. In the case it procures on its own behalf, the SEAP should be considered as 
an  international  organisation  purchasing  for  its  own  purposes  within  the  meaning  of 
Article  12(c)  of  Directive  2009/81/EC  in  conformity  with  State  aid  rules.  Where  it 

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procures  on  behalf  of  its  members,  in  order  to  ensure  an  adequate  incentive  for 
Member States to engage in a cooperation within the SEAP, the SEAP should be able 
to define its own rules of procurement by derogation to Directive 2009/81/EC. These 
rules  should  ensure  compliance  with  EU  primary  law  principles  applicable  to 
procurement, in particular those of transparency, non-discrimination and competition.  

(40)  A SEAP could qualify for funding in accordance with Title VI of the Regulation (EU, 
Euratom) No 2018/1046. Funding under the Cohesion Policy could also be possible, in 
conformity with the relevant Community legislation. 

(41) 

In order to carry out its tasks in the most efficient way and as a logical consequence of 
its  legal  personality,  a  SEAP  should  be  liable  for  its  debts.  In  order  to  allow  the 
members  to  find  appropriate  solutions  regarding  their  liability,  the  option  should  be 
given to provide in the Statutes for different liability regimes going above the liability 
limited to the contributions of the members.  

(42)  Since a SEAP is established under Union law, it should be governed by Union law, in 
addition  to  the  law  of  the  State  where  it  has  its  statutory  seat.  However,  the  SEAP 
could  have  a  place  of  operation  in  another  State.  The  law  of  that  latter  State  should 
apply in respect of specific matters defined by the Statutes of the SEAP. Furthermore, 
a SEAP should be governed by implementing rules complying with the Statutes. 

(43) 

information  about  circumstances 

In  order  to  ensure  sufficient  control  of  compliance  with  this  Regulation,  a  SEAP 
should transmit to the Commission and relevant public authorities its annual report and 
any 
the 
achievement  of  its  tasks.  If  the  Commission  obtains  indications,  through  the  annual 
report or otherwise, that the  SEAP acts  in  serious breach of this Regulation  or other 
applicable law, it should request explanations and/or actions from the SEAP and/or its 
members. In extreme cases and if no remedial action is taken, the Commission could 
repeal the decision setting up the SEAP, thus triggering the winding-up of the SEAP. 

to  seriously 

threatening 

jeopardise 

(44)  Upon the adoption of ASAP, the European Parliament and the Council called on the 
Commission  to  consider,  putting  forward  a  legal  framework  aimed  at  ensuring  the 
security  of  supply  (Joint  Statement  of  11  July  2023).  This  joint  statement  by  co-
legislators echoed the conclusions of the European Council in December 2013 calling 
for  a  comprehensive  EU-wide  Security  of  Supply  regime  and  the  European 
Parliament’s  recommendation  of  8  June  2022  urging  the  Commission  to  present, 
without delay, such a regime. 

(45)  The  crisis  resulting  from  Russia’s  war  of  aggression  against  Ukraine  has  not  only 
demonstrated deficiencies in the Union’s and Ukraine’s defence industrial sector, but 
has  also  posed  challenges  to  the  functioning  of  the  internal  market  for  defence 
products.  Indeed,  the  steady  degradation  of  the  geopolitical  context  has  already 
entailed  a  significant  and  lasting  increase  in  the  demand  that  may  affect  the 
functioning  of  the  internal  market  for  the  production  and  sale  of  certain  defence 
products  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  the  relevant  defence  products.  Sometimes,  difficulties  in 
accessing one raw material or a specific component hamper entire production chains. 
To ensure the functioning of the internal market under any circumstances and to make 
it resilient to any shock, it is necessary to establish, in a coordinated way, harmonised 
rules for increasing the security of supply of defence products. Those measures should 
be based on Article 114 TFEU. 

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(46)  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. Such applications should be given priority 
when balancing legal interests in the individual case. 

(47) 

In  view  of  the  objective  of  this  Regulation,  and  of  the  emergency  situation  and  the 
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 the use of such exemptions would facilitate the achievement of that 
objective.  That  could  in  particular  apply  to  Union  law  concerning  environmental, 
health and safety issues, which is indispensable to improving the protection of human 
health  and  the  environment,  as  well  as  to  achieving  a  sustainable  and  safe 
development. However, the implementation of that law could 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 
Union  and  its  Member  States  to  urgently  look  into  any  action  they  could  take  to 
mitigate possible obstacles. Any such action, whether at  Union,  regional, or national 
level, should not compromise the environment, health and safety. 

(48)  Directive  2009/81/EC  of  the  European  Parliament  and  of  the  Council  aims  at 
harmonising procurement procedures for the award of public contracts in the field of 
defence and security thus enabling the security requirements of Member States and the 
obligations  arising  from  the  TFEU  to  be  met.  That  Directive  contains,  in  particular, 
specific provisions governing situations of urgency resulting from a crisis, in particular 
shortened  periods  for  the  receipt  of  tenders  and  the  possibility  to  use  the  negotiated 
procedure without prior publication of a contract notice. However, in extreme urgency, 
in particular during supply and security crises, these rules could be incompatible even 
with those provisions in cases where two or more Member States intend to engage in a 
common  procurement.  In  some  cases,  the  only  solution  that  ensures  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  original  framework 
agreement.  

(49) 

In  accordance  with  the  case  law  of  the  Court  of  Justice  of  the  European  Union, 
modifications  to  a  public  contract  are  to  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 that regard, 
it  should  be  possible  to  derogate  from  Directive  2009/81/EC  by  increasing  the 
quantities  provided  for  in  a  framework  agreement  while  opening  it  to  contracting 
authorities/entities of other Member States. With respect to those additional quantities, 
those contracting authorities/entities should enjoy the same conditions as the original 
contracting authority/entity that concluded the original framework agreement. In such 
cases,  the  original  contracting  authority/entity  should  also  allow  any  economic 
operator who fulfils the contracting authority’s/entity’s conditions initially laid down 
in  the  procurement  procedure  for  the  framework  agreement,  including  requirements 
for qualitative selections as referred to in Articles 39 to 46 of Directive 2009/81/EC, to 
join that framework agreement. In addition, appropriate transparency measures should 
be taken to ensure that all potentially interested parties are informed.  

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(50)  While the response of the EU and its Member States to the immediate challenge of the 
Russian war of aggression against Ukraine has been rapid and decisive, it is  time for 
the  EU  to  move  from  the  emergency  response  to  building  the  EU’s  long-term 
readiness. Resilience is a precondition of the EDTIB’s readiness and competitiveness. 
The EU has  already developed tools and frameworks to  increase industrial  readiness 
and  resilience  to  tackle  future  crisis  situations.  However,  such  measures  are  not 
available to support the EDTIB.  

(51) 

It is therefore necessary to set up a modular and gradual EU Security of Supply regime 
to enhance solidarity and effectiveness in response to tensions along the supply chains 
or  to  security  crises  and  allow  for  the  timely  identification  of  potential  bottlenecks. 
Such a regime should enable the EU and its Member States to anticipate and address 
the  consequences  of  supply  crises,  where  shortages  of  civilian  or  dual-use 
components, or of raw materials, seriously threaten the timely availability and supply 
of  defence  products  ,  and  also  the  consequences  of  supply  crises  which  are  directly 
linked to the existence of a security crisis within the Union or its neighbourhood and 
which result in shortages of certain defence products. 

(52)  To  enable  anticipation  of  potential  shortages,  national  competent  authorities  should 
alert the Commission if they become aware of a risk of serious disruption in the supply 
of  crisis  relevant  products  or  have  concrete  and  reliable  information  of  any  other 
relevant risk factor or event materialising. In order to ensure a coordinated approach, 
the Commission should, where it learns of a risk of serious disruption in the supply of 
defence  products  or  has  concrete  or  reliable  information  of  any  other  relevant  risk 
factor  or  event  materialising,  convene  an  extraordinary  meeting  of  the  Defence 
Industrial  Readiness  Board  to  discuss  the  severity  of  the  disruptions  and  possible 
initiating of the procedure for activating the supply crisis state, and whether it may be 
appropriate, necessary and proportionate for Member States to enter into dialogue with 
stakeholders,  with  a  view  to  identifying,  preparing  and  possibly  coordinating  such 
preventive measures. The Commission should, where relevant, consult and cooperate 
with  relevant  third  countries  with  a  view  to  jointly  addressing  supply-chain 
disruptions,  in  compliance  with  international  obligations  and  without  prejudice  to 
procedural requirements. 

(53) 

(54) 

In  light  of  the  complexities  of  defence  supply  chains  and  the  risk  of  shortages  in  a 
foreseeable  future,  this  Regulation  should  provide  instruments  for  a  coordinated 
approach to mapping and monitoring of the supply chains of certain defence products 
and effectively tackling possible market disruptions in a proportionate manner. 
 The objective of a mapping of the Union’s defence supply chains should be to provide 
an analysis of their strengths and weaknesses with a view to ensure security of supply 
and resilience. To that end, the Commission should identify products, components as 
well  as  raw  materials  that  are  deemed  critical  for  the  supply  of  defence  products 
particularly  important  for  the  defence  interests  of  the  Union  and  its  Member  States 
(crisis-relevant products), based on the inputs and advice from the Defence Industrial 
Readiness  Board.  The  mapping  should  be  based  on  publicly  and  commercially 
available  data  and,  if  necessary,  on  data  obtained  through  voluntary  information 
requests of undertakings, in consultation with the Defence Industrial Readiness Board. 

(55) 

In  order  to  forecast  and  prepare  for  future  disruptions  of  the  different  stages  of  the 
Union’s defence supply chains and of trade within the Union, the Commission should, 
assisted by the Defence Industrial Readiness Board and on the basis of the outcome of 
the mapping, identify  and develop  a list  of early warning indicators. Such indicators 

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could  include  atypical  increases  in  lead  time,  the  availability  of  raw  materials, 
intermediate  products  and  human  capital  needed  for  manufacturing  crisis-relevant 
products,  or  appropriate  manufacturing  equipment,  forecasted  demand,  price  surges 
exceeding  normal  price  fluctuation,  the  effect  of  security  crises,  accidents,  attacks, 
natural  disasters  or  other  serious  events,  the  effect  of  trade  policies,  tariffs,  export 
restrictions, trade barriers and other trade-related measures, and the effect of business 
closures, offshoring or acquisitions of key market actors. Monitoring activities of the 
Commission should focus on these early warning indicators. 

(56) 

In order to minimise the burden for undertakings responding to the monitoring and to 
ensure  that  the  acquired  information  can  be  compiled  in  a  meaningful  way,  the 
Commission  should  provide  for  standardised  and  secure  means  for  any  information 
collection.  These  means  should  ensure  that  any  collected  information  is  treated 
confidentially, ensuring business secrecy and cybersecurity. 

(57)  On  this  basis,  the  Commission  should  draw  up  a  list,  identifying  the  crisis-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, 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. 

(58)  Due  to  the  sensitive  nature  of  the  decision  to  activate  the  supply-crisis  state  or  the 
security-related supply-crisis state and of the potential measures that may be taken in 
response thereof, including the significant impact which such measures might have on 
private undertakings in the Union, the power to adopt an implementing act as regards 
activating, prolonging and terminating these states should be conferred on the Council. 

(59)  Where the supply-crisis state or the security-related supply-crisis state is activated, the 
Commission, should be able to request to receive necessary information to ensure the 
timely  availability  of  crisis  relevant  products  from  undertakings,  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.  

(60)  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,  and  stockpiles’  status.  It 
should  also  enable  Commission  to  design  emergency  response  measures  to  actual  or 
anticipated shortages. 

(61)  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  crisis  relevant  products,  such  as  the  freedom  to  conduct  a  business  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.  

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(62)  As an instrument of last resort to ensure that critical sectors can continue to operate in 
a time of crisis and only when necessary and proportionate for that purpose, relevant 
undertakings could  be required by the Commission to  accept  and prioritise orders of 
crisis-relevant  products.  The  decision  on  a  priority-rated  order  should  be  taken  in 
accordance  with  all  applicable  Union  legal  obligations,  having  regard  to  the 
circumstances of the case. The priority rating obligation should take precedence over 
any performance obligation under private or public law except those directly related to 
military orders while it should have regard for the legitimate aims of the undertakings 
and the cost and effort required for any change in production sequence. Each priority-
rated  order  should  be  placed  at  a  fair  and  reasonable  price  which  should  take  into 
account the undertaking’s opportunity costs vis-à-vis existing contracts.  

(63)  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. 

(64)  Where the security-related supply crisis state is activated, based on the assessment of 
the Commission with the support of the High-Representative, the measures available 
under  the  supply  crisis  state  should  also  be  available.  In  addition  to  the  latter,  the 
Council should activate the measures it considers appropriate to  the crisis. To do so, 
the Council should pay particular to the need to ensure a high level of security of the 
Union, Member States and European citizens.  

(65)  Where the security-related supply crisis state is activated and in order to address cases 
where a Member State faces or may face severe difficulties either in the placing of an 
order  or  in  the  execution  of  a  contract  for  the  supply  of  defence  products  due  to 
shortages or serious risks of shortages of crisis-relevant products, the Council should 
be able to activate measures at Union level aimed to ensure the availability of crisis-
relevant goods, such as priority rated requests to ensure the proper functioning of the 
internal market and its defence supply chains.  

(66)  As  an  instrument  of  last  resort,  priority-rated  requests  should  aim  at  addressing 
situations where the production or supply of crisis relevant products which are defence 
products  could  not  be  achieved  by  other  measures.  The  priority-rated  request  should 
be taken based on objective, factual, measurable, and substantiated data. It should have 
regard for the legitimate interests of the undertakings and the cost and effort required 
for any change in production sequence. When accepted, the obligation to perform the 
priority-rated  request  should  take  precedence  over  any  performance  obligation  under 
private  or  public  law.  Each  priority  rated  request  should  be  placed  at  a  fair  and 
reasonable price.  

(67)  With a view to support the Commission in implementing this Regulation, a European 
Defence  Industrial  Readiness  Board  should  be  established,  composed  of  the 
Commission,  the  High  Representative/Head  of  the  Agency  and  Member  States.  In 
addition,  outside 
the  High 
Representative/Head  of  Agency  and  the  Commission  will  at  their  initiative  convene 
and co-chair meetings of the members in the context of the Board to exercise the joint 
programming  and  procurement  function  and  provide  strategic  guidance  and  advice 

the  current  Regulation, 

framework  of 

the 

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with  a  view  to  increase  defence  industrial  readiness  of  the  EDTIB,  in  line  with  the 
European Defence Industrial Strategy. 

(68)  This  Regulation  should  apply  without  prejudice  to  Union  competition  rules,  in 
particular  Articles  101  to  109  TFEU  and  the  legal  acts  that  give  effect  to  those 
Articles. 

(69) 

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

(70)  This Regulation should apply without prejudice to the specific character of the security 

and defence policy of certain Member States, 

HAVE ADOPTED THIS REGULATION: 

Chapter I 

General Provisions 

Article 1 

Subject Matter 

This  Regulation  establishes  a  budget  and  lays  down  a  set  of  measures  aimed  at  supporting 
defence industry readiness of the Union and its Member States through the strengthening of 
the competitiveness,  responsiveness  and ability  of the European Defence Technological  and 
Industrial Base (EDTIB) to ensure the timely availability and supply of defence products and 
at  contributing  to  the  recovery,  reconstruction  and  modernisation  of  the  Ukraine  Defence 
Technological and Industrial Base (Ukrainian DTIB), in particular by means of the following: 

(1) 

(2) 

(3) 

(4) 

the establishment of the European Defence Industrial Programme (the ‘Programme’), 
comprising  measures  for  the  strengthening  of  the  competitiveness,  responsiveness 
and  ability  of  the  EDTIB,  which  may  include  the  establishment  of  a  fund  for  the 
acceleration of defence supply chain transformation (‘FAST’); 

the  establishment  of  a  cooperation  programme  with  Ukraine  with  a  view  to  the 
recovery,  reconstruction  and  modernisation  of  the  Ukraine  Defence  Technological 
and Industrial Base (the ‘Ukraine Support Instrument’); 

a legal framework laying down the requirements and procedures for and the effects 
of setting-up the Structure for European Armament Programme (‘SEAP’) as set out 
in Chapter III; 

a  legal  framework  aiming  at  ensuring  security  of  supply,  removing  obstacles  and 
bottlenecks and supporting the production of defence products as set out in Chapter 
IV; 

(5) 

the establishment of a Defence Industrial Readiness Board as set out in Chapter V. 

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Article 2 

Definitions 

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

(1) 

(2) 

(3) 

(4) 

(5) 

(6) 

(7) 

(8) 

(9) 

'advance  purchasing  agreement’  means  a  public  contract  with  one  or  several 
undertakings which aims at supporting the swift development and/or production of a 
product and by virtue of which the right to buy a specified number of products in a 
given  timeframe  and  at  a  given  price  is  subject  to  the  prefinancing  of  part  of  the 
upfront  costs  faced  by  the  concerned  undertakings.  While  an  advance  purchasing 
agreement is legally binding upon the participating contracting authorities and upon 
the  contractor,  it  needs  to  be  further  implemented  by  means  of  the  conclusion  of 
contracts with the concerned contractors; 

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

'blending  operation'  means  an  action  supported  by  the  Union  budget,  including 
within a blending facility or platform as defined in Article 2, point (6) of Regulation 
(EU,  Euratom)  No  [2018/1046],  that  combines  non-repayable  forms  of  support 
and/or financial instruments from the Union budget with repayable forms of support 
from  development  or  other  public  finance  institutions,  or  from  commercial  finance 
institutions and investors 

‘common  procurement’  means  a  procurement  jointly  conducted  by  at  least  three 
Member States; 

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

‘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; 

‘defence products’ means any defence-related products as referred to in Article 2 of 
Directive 2009/43/EC; 

‘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; 

‘legal  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  Article  197(2),  point  (c),  of  the  Regulation 
(EU, Euratom) No 2018/1046; 

(10) 

‘defence innovation action' means an action primarily consisting of activities directly 
aiming  to  produce plans and  arrangements or designs for new, altered or improved 

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(11) 

(12) 

(13) 

(14) 

(15) 

(16) 

(17) 

(18) 

(19) 

(20) 

(21) 

defence  products,  processes  or  services,  possibly  including  prototyping,  testing, 
demonstrating, piloting, large-scale product validation and market replication 

‘middle capitalisation company’ or ‘mid-cap’ means an enterprise that is not a SME 
and  that  employs  a  maximum  of  3  000  persons,  where  the  headcount  of  staff  is 
calculated  in  accordance  with  Articles  3  to  6  of  the  Annex  to  Recommendation 
2003/361/EC 

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

‘off-take  agreement’  means  any  contractual  agreement  between  at  least  [three] 
Member States and at least one manufacturer of defence products containing either a 
commitment on the Member States to procure a certain quantity of defence products 
over  a  certain  period  of  time  or  a  commitment  on  the  manufacturer  of  defence 
products to provide the Member States with the option to do so. 

‘procurement  agent’  means  a  contracting  authority  as  defined  in  Article 2(1),  point 
(1), of Directive 2014/24/EU and Article 3(1) of Directive 2014/25/EU established in 
a Member State or an associated country, the European Defence Agency, a Structure 
for  European  Armament  Programme  or  an  international  organisation  that  is 
designated by Member States, associated countries or Ukraine to conduct a common 
procurement on their behalf; 

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

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

‘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;  
‘security crisis’ means any situation in a Member State, an associated third country 
or non-associated third country in which a harmful event has occurred or is deemed 
to be impending which clearly exceeds the dimensions of harmful events in everyday 
life  and  which  substantially  endangers  or  restricts  the  life  and  health  of  people,  or 
requires  measures  in  order  to  supply  the  population  with  necessities,  or  has  a 
substantial impact on property values, including  armed conflicts and wars; 

‘sensitive information’ means information and data, including classified information, 
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; 

‘small  and  medium-sized  enterprises’  or  ‘SMEs’  means  small  and  medium-sized 
enterprises  as  defined  in  Article  2  of  the  Annex  to  Commission  Recommendation 
2003/361/EC; 

'subcontractors in the common procurement’ means any legal entity which provides 
critical inputs that possess unique attributes essential for the functioning of a product 
and which is allocated at least 15 % of the value of the contract. 

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(22) 

(23) 

‘small middle capitalisation company’ or ‘small mid-cap’ means an enterprise that is 
not  a  SME  and whose  number  of  employees  does  not  exceed 499,  calculated  in 
accordance with Articles 3 to 6 of the Annex to Recommendation 2003/361/EC, the 
annual  turnover  of  which  does  not  exceed  EUR 100  million  or  the  annual  balance 
sheet of which does not exceed EUR 86 million; 

‘crisis-relevant  products’  means  defence  products  or  key  components  or  raw 
materials  thereof  or  any  products  or  services  critical  to  their  production  that  have 
been identified as being seriously affected by a disruption or potential disruption of 
the  functioning  of  the  internal  market  and  its  supply  chains  resulting  in  actual  or 
potential significant shortages. 

Chapter II 

Section 1: General provisions applicable to the Programme and to 
the Ukraine Support Instrument 

1. 

2. 

Article 3 

Use of financing not linked to costs 

Grants may take the form of financing not linked to costs, pursuant to Article 180(3) 
of Regulation (EU, Euratom) 2018/1046. 

Where  the  Union  grant  takes  the  form  of  financing  not  linked  to  costs  for  actions 
reinforcing the EDTIB, the level of the Union contribution attributed to each action 
may be defined on the basis of factors such as: 

(a) 

(b) 

the  complexity  of  the  common  procurement,  for  which  a  proportion  of  the 
estimated  value  of  the  common  procurement  contract  and  the  experience 
gained in similar actions may serve as an initial proxy; 

the  characteristics  of  the  cooperation  which  are  likely  to  give  rise  to  greater 
interoperability  outcomes  and  long-term  investment  signals  to  industry,  in 
particular  where  the  common  procurement  covers  activities  that  would  be 
eligible  for  funding  from  the  Union  budget,  e.g.  research  and  development, 
testing and certification, initial production or in-service support activities; 

(c) 

the  number  of  participating  Member  States  and  associated  countries  or  the 
inclusion  of  additional  Member  States  or  associated  countries  in  existing 
cooperations; 

(d) 

the effort linked to ramp-up of necessary manufacturing capacities; 

(e) 

the  procurement  of  additional  quantities  for  other  Member  States  (defence 
readiness pool). 

3. 

Where  the  Union  grant  takes  the  form  of  financing  not  linked  to  costs  for  actions 
reinforcing the Ukrainian DTIB, the level of Union contribution may in addition to 
the factors referred to in paragraph 2, be based on factors such as:  

(a) 

the complexity of the Ukraine accession process, including  structural  reforms 
and measures to promote convergence with the Union ‘acquis’; 

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(b) 

(c) 

the  efforts  of  adapting  the  Ukrainian  defence  procurement  processes  and  the 
environment  for  the  Ukrainian  defence  industry,  including  to  meet  NATO 
standards; 

the efforts and risks associated with the ongoing war of aggression, taking into 
account the need to rebuild and modernise infrastructure damaged by the war 
in  a  resilient  way,  and,  where  relevant,  by  appropriate  measures  to  avoid, 
prevent or reduce and, if possible, offset these effects. 

Article 4 

Objectives  

1. 

The  Programme  and  the  Ukraine  Support  Instrument  aim  at  increasing  the  defence 
industrial readiness of the EDTIB and of the Ukrainian DTIB in particular through:  

(a) 

(b) 

initiating  and  speeding  up  the  adjustment  of  industry  to  structural  changes, 
including through the creation and ramp-up of its manufacturing capacities and 
the  opening  of  the  supply  chains  for  cross-border  cooperation  and  effective 
availability  and  supply  throughout  the  Union,  involving  in  particular,  to  a 
significant extent, SMEs, small mid-caps and other mid-caps;  

incentivising  cooperation  in  defence  procurement  in  order  to  contribute  to 
solidarity,  prevent  crowding-out  effects,  increase  the  effectiveness  of  public 
spending and reduce excessive fragmentation, ultimately leading to an increase 
in the standardisation of defence systems and greater interoperability. 

Actions  contributing  to  the  recovery,  reconstruction  and  modernisation  of  the 
Ukrainian  DTIB  shall  take  into  account  its  possible  future  integration  into  the 
EDTIB,  thereby  contributing  to  mutual  stability,  security,  peace,  prosperity  and 
sustainability. 

The objectives set out in paragraph 1, point (a), shall be pursued with an emphasis on 
initiating and speeding up the adjustment of industry to the rapid structural changes 
imposed  by  the  evolving  security  environment.  This  may  include  the  improvement 
and  acceleration  of  the  capacity  of  adaptation  of  supply  chains  for  crisis-relevant 
products, the creation of manufacturing capacities or their ramp-up, and a reduction 
of their lead production time for defence products throughout the Union, taking into 
account  the  objectives  of  the  Strategic  Compass  for  Security  and  Defence  and  the 
advice of the Defence Industrial Readiness Board. 

The objectives set out in paragraph 1, point (b), shall be pursued with an emphasis on 
developing  the  EDTIB  throughout  the  Union  to  allow  it  to  address,  in  particular, 
Member States’ defence product needs in terms of quality, availability, delivery time 
and  location,  in  line  with  the  defence  capability  priorities  commonly  agreed  by 
Member  States  within  the  framework  of  the  Common  Foreign  and  Security  Policy 
(CFSP), in particular in the context of the Capability Development Plan, taking into 
account  the  objectives  of  the  Strategic  Compass  for  Security  and  Defence  and  the 
advices of the Defence Industrial Readiness Board. 

The  objectives  set  out  in  paragraph  2  shall  be  pursued  with  an  emphasis  on 
enhancing  cross-border  cooperation  between  the  EDTIB  and  the  Ukrainian  DTIB, 
taking  into  account  the  defence  product  needs  of  Ukraine,  through  creation  of 
manufacturing  capacities or their  ramp-up in  line with  NATO standards,  protection 
of  assets,  technical  assistance  and  exchange  of  personnel,  increased  cooperation  on 

2. 

3. 

4. 

5. 

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common  procurement  of  defence  products  for  Ukraine  and  licensing  production 
cooperation  through  public-private  partnerships  or  other  forms  of  cooperation,  e.g. 
joint ventures. Special attention shall be given to the objective to support Ukraine to 
progressively align with Union rules, standards, policies and practices (‘acquis’) with 
a view to future Union membership. 

Article 5 

Budget 

1. 

The  financial  envelopes  for  the  implementation  of  the  Programme  and  the  Ukraine 
Support Instrument shall be composed of: 

(a) 

(b) 

for actions reinforcing the EDTIB: EUR 1 500 millions in current prices for the 
period  from  […  -  insert  a  specific  date]  until  31  December  2027  as  well  as 
additional contributions in accordance with Article 6;  

for  actions  reinforcing  the  Ukrainian  DTIB:  the  amount  of  the  additional 
contributions in accordance with Article 6 to the extent earmarked, subject to 
the conclusion of the agreement referred to in Article 57.  

In order to respond to unforeseen situations or to new developments and needs, the 
Commission may reallocate the amount allocated to actions referred to in paragraph 
1, by a maximum of 20 %, except for the additional financial resources as referred to 
in Article 6(2), which shall not be reallocated.  

The  amount  referred  to  in  paragraph  1  and  5  of  this  Article  and  the  amounts  of 
additional  contributions  referred  to  in  Article  6  may  also  be  used  for  technical  and 
administrative  assistance  for  the  implementation  of  the  Programme,  such  as 
preparatory,  monitoring,  control,  audit  and  evaluation  activities,  including  price 
investigations  and corporate information technology systems  and platforms,  and all 
other technical and administrative assistance or staff-related expenses incurred by the 
Commission  for  the  management  of  the  Programme/other  elements  of  the  subject 
matter.  

In  addition  to  Article  12(4)  of  Regulation  (EU,  Euratom)  2018/1046,  unused 
commitment and payment appropriations shall be automatically carried over and may 
be  committed  and  used,  respectively,  until  31  December  of  the  following  financial 
year. The amount carried over shall be used first in the following financial year. The 
Commission  shall  inform  the European Parliament  and the Council of  commitment 
appropriations  carried  over  in  accordance  with  Article  12(6)  of  Regulation  (EU, 
Euratom) 2018/1046. 

By way of derogation from Article 209(3), first, second and fourth subparagraphs of 
Regulation  (EU, Euratom) 2018/1046,  any revenues and repayments from  financial 
instruments  established  under  this  Regulation  shall  constitute  internal  assigned 
revenue  within  the  meaning  of  Article  21(5)  of  Regulation  (EU,  Euratom) 
2018/1046, to the Programme or its successor programme. 

In  addition  to  Article  15  of  Regulation  (EU,  Euratom)  2018/1046,  commitment 
appropriations  corresponding  to  the  amount  of  recoveries  and  of  decommitments 
shall be made available again to the Programme or  the Ukraine Support  Instrument 
or their successors in the context of the budgetary procedure. 

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

2. 

3. 

4. 

5. 

6. 

7. 

EN 

31 

  EN 

8. 

1. 

2. 

3. 

4. 

1. 

6 

Appropriations  may  be  entered  in  the  Union  budget  beyond  2027  to  cover  the 
expenses  necessary  to  fulfil  the  objectives  set  out  in  Article  4,  to  enable  the 
management  of  actions  not  completed  by  the  end  of  the  Programme,  as  well  as 
expenses covering critical operational activities and services. 

Article 6 

Additional financial resources 

Member  States,  European  Union  institutions,  bodies  and  agencies,  third  countries, 
international  organisations,  international  financial  institutions  or  other  third  parties, 
may  provide  additional  financial  contributions  to  the  Programme,  including  to  the 
Fund Accelerating the defence Supply Chains Transformation (FAST) referred to in 
Article  19  in  accordance  with  Article  208(2)  of  the  Regulation  (EU,  Euratom)  No 
2018/1046.  Such  financial  contributions  shall  constitute  external  assigned  revenue 
within the meaning of Article 21(2), points (a)(ii) [point (a) FR recast], (d), or (e) or 
Article 21(5) of the Regulation (EU, Euratom) No 2018/1046. 

Any additional amounts received under the relevant Union restrictive measures shall 
be external assigned revenue within the meaning of Article 21(5) of Regulation (EU, 
Euratom)  2018/1046  and  shall  be  used  for  actions  under  the  Ukraine  Support 
Instrument, including actions reinforcing the Ukrainian DTIB. 

Resources  allocated  to  Member  States  under  shared  management  may,  at  their 
request,  be  transferred  to  the  Programme  subject  to  the  conditions  set  out  in  the 
relevant  provisions  of  Regulation  (EU)  2021/1060  of  the  European  Parliament  and 
the  Council6.  The  Commission  shall  implement  those  resources  directly  in 
accordance with Article 62(1), point (a) of the first subparagraph, of the Regulation 
(EU,  Euratom)  No  2018/1046  or  indirectly  in  accordance  with  point  (c)  of  that 
subparagraph. They shall be added to the resources referred to in Article 5(3), point 
(a). Those resources shall be used for the benefit of the Member State concerned.  

Where  the  Commission  has  not  entered  into  a  legal  commitment  under  direct  or 
indirect management for resources transferred in accordance with paragraph 3 and at 
the  latest  in  the  year  2028,  the  corresponding  uncommitted  resources  may  be 
transferred back to one or more respective source programmes, at the request of the 
Member State, in accordance with the conditions set out in the relevant provisions of 
Regulation (EU) 2021/1060 of the European Parliament and of the Council. 

Section 2: The Programme 

Article 7 

Alternative, combined and cumulative funding 

The Programme shall be implemented in synergy with other Union programmes. An 
action  that  has  received  a  contribution  from  another  Union  programme  may  also 

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  Programme  for  Financial  Support  for  Border  Management  and  Visa 
Policy (OJ L 231, 30.6.2021, p. 159–706). 

EN 

32 

  EN 

 
receive a contribution under the Programme provided that the contribution does not 
cover the same costs. The rules of the relevant Union programme shall apply to the 
corresponding contribution or a single set of rules of any of the contributing Union 
programmes may be applied to all contributions and a single legal commitment may 
be  concluded.  The  cumulative  support  from  the  Union  budget  shall  not  exceed  the 
total  eligible  costs  of  the  action  and  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  Programme,  actions  shall 
comply with all of the following conditions:  

3. 

1. 

2. 

3. 

4. 

(a) 

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

(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.  

In accordance with the relevant provisions of Regulation (EU) 2021/1060, the ERDF 
or  ESF+  may  support  proposals  submitted  to  a  call  for  proposals  under  the 
Programme,  which  were  awarded  a  Seal  of  Excellence  in  accordance  with  the 
Programme.  

Article 8 

Implementation and forms of Union funding 

The Programme shall be implemented under direct management in accordance with 
the Regulation (EU, Euratom) No 2018/1046 or in indirect management with bodies 
referred  to  in  Article  62(1),  point  (c),  of  the  Regulation  (EU,  Euratom)  No 
2018/1046.  

Union funding may be provided in any of the forms laid down in the Regulation (EU, 
Euratom)  No  2018/1046,  in  particular  grants,  prizes,  procurement,  and  financial 
in 
instruments  within  blending  operations  under 
accordance with Title X of the Regulation (EU, Euratom) No 2018/1046. 

the  InvestEU  programme 

By  way  of  derogation  from  Article  192(2)  of  the  Regulation  (EU,  Euratom)  No 
2018/1046, activities referred to in Article 11(3), point (d), for which Union funding 
is provided in the form of a grant, and profit is made, the Commission may recover 
the  percentage  of  the  profit  corresponding  to  the  Union  contribution  to  the  eligible 
costs  actually  incurred  by  the  beneficiary  carrying  out  the  action,  up  to  the  final 
amount  of  the  Union  contribution.  The  profit  is  calculated  by  a  surplus  of  receipts 
over  the  eligible  costs  of  the  action,  where  receipts  are  limited  to  Union  funding, 
Member  State  funding,  including  procurement,  other  revenue  generated  during  the 
action and any revenue resulting from the action. The work programme may set out 
further details.  

By way of derogation from Article 193(2) of Regulation (EU, Euratom) 2018/1046, 
financial contributions may, where relevant and necessary for the implementation of 
an action, cover actions started and costs incurred prior to the date of the submission 
of  the  proposal  for  those  actions,  provided  that  those  actions  did  not  start  before  5 
March  2024  and  have  not  been  completed  before  the  signature  of  the  grant 
agreement. 

EN 

33 

  EN 

Article 9 

Third countries associated to the Programme 

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

1. 

2. 

3. 

4. 

5. 

Article 10 

Eligible legal entities 

The  eligibility  criteria  set  out  in  paragraphs  2  to  7  shall  apply  in  addition  to  the 
criteria set out in accordance with Regulation (EU, Euratom) 2018/1046. 

Recipients  of  Union  funding  shall  be  established  in  the  Union  or  in  an  associated 
country. 

The infrastructure, facilities, assets and resources of the recipients which are used for 
the purposes of the action shall be located on the territory of a Member State or of an 
associated  country.  Where  recipients  have  no  readily  available  alternatives  or 
relevant  infrastructure,  facilities,  assets  and  resources  in  the  Union  or  in  an 
associated country, they may use their infrastructure, facilities, assets and resources 
which  are  located  or  held  outside  the  territory  of  the  Member  States  or  of  the 
associated  countries,  provided  that  such  use  does  not  contravene  the  security  and 
defence  interests  of  the  Union  and  the  Member  States  and  is  consistent  with  the 
objectives set out in Article 4. 

For the purposes of an action supported by the Programme, the recipients shall not be 
subject  to  control  by  a  non-associated  third  country  or  by  a  non-associated  third-
country entity. 

By way of derogation from paragraph 4, a legal entity 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 be eligible to be a recipient if the acquisition of 
its control by a non-associated third country or a non-associated third-country entity, 
has been subject to screening within the meaning of Regulation (EU) 2019/452 of the 
European  Parliament  and  of  the  Council  and,  where  necessary,  to  appropriate 
mitigation  measures,  taking  into  account  the  objectives  set  out  in  Article  4  of  this 
Regulation, or if guarantees approved by the Member State or the associated country 
in  which  it  is  established  in  accordance  with  its  national  procedures  are  made 
available to the Commission.  

The guarantees shall provide assurances that the involvement in an action of such a 
legal entity 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  Treaty  on  European  Union  (TEU),  or  the  objectives  set  out  in  Article  4.  The 
guarantees  shall  also  comply  with  Article  11(8),  point  (c).  The  guarantees  shall  in 
particular  substantiate  that,  for  the  purposes  of  an  action,  measures  are  in  place  to 
ensure that: 

(a) 

control  over  the  legal  entity  is  not  exercised  in  a  manner  that  restrains  or 
restricts  its  ability  to  carry  out  the  action  and  to  deliver  results,  that  imposes 
resources, 
infrastructure, 
restrictions  concerning 

facilities,  assets, 

its 

EN 

34 

  EN 

6. 

intellectual property or knowhow needed for the purposes of the action, or that 
undermines its capabilities and standards necessary to carry out the action; 

(b) 

access  by a non-associated third country or by  a non-associated third-country 
entity  to  sensitive  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; 

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

The  Commission  shall  inform  the  committee  referred  to  in  Article  57  of  any  legal 
entity considered to be eligible in accordance with this paragraph. 

When  carrying  out  an  eligible  action,  recipients  may  also  cooperate  with  legal 
entities  established  outside  the  territory  of  the  Member  States  or  of  associated 
countries,  or  controlled  by  a  non-associated  third  country  or  by  a  non-associated 
third-country  entity,  including  by  using  the  assets,  infrastructure,  facilities  and 
resources  of  such  legal  entities,  provided  that  this  does  not  contravene  the  security 
and defence interests of the Union and its Member States. Such cooperation shall be 
consistent  with  the  objectives  set  out  in  Article  4  and  comply  with  Article  11(8), 
point (c). 

There  shall  be  no  unauthorised  access  by  a  non-associated  third  country,  or  other 
non-associated third-country entity  to classified information  relating  to  the carrying 
out  of  the  action  and  potential  negative  effects  over  security  of  supply  of  inputs 
critical to the action shall be avoided. 

The  costs  related  to  those  activities  shall  not  be  eligible  for  support  from  the 
Programme. 

7. 

Paragraphs 2 to 6 shall not apply to:  

(a) 

contracting authorities of Member States and associated countries; 

(b) 

International Organisations; 

(c)  Structures for European Armament Programme; 

(d) 

the European Defence Agency. 

Article 11 

Eligible actions 

1. 

2. 

3. 

Only  actions  implementing  the  objectives  set  out  in  Article  4  shall  be  eligible  for 
funding. An eligible action shall relate to one or more of the activities referred to in 
paragraph 2 to 5: 

Activities  related  to  cooperation  of  public  authorities  in  defence  procurement 
processes  (defence  cooperation  actions)  may  cover  the  cooperation  for  common 
procurement  of  defence  products,  throughout  the  life  cycle  of  defence  products, 
including for the purpose of building a Defence Industrial Readiness Pool as referred 
to Article 14(1), point (b). 

Activities  related  to  speeding  up  the  adjustment  to  structural  changes  of  the 
their  components  and 
production  capacity  of  defence  products, 

including 

EN 

35 

  EN 

corresponding  raw  materials  insofar  as  they  are  intended  or  used  wholly  for  the 
production of defence products (industry reinforcement actions) may cover: 

(a) 

(b) 

(c) 

(d) 

the  optimisation,  expansion,  modernisation,  upgrading  or  repurposing  of 
existing,  or  the  establishment  of  new,  production  capacities  insofar  as  those 
components and raw materials are intended or used wholly for the production 
of defence products, in particular 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-border  industrial  partnerships,  including  through 
public private partnerships or other forms  of industrial cooperation, in  a  joint 
industrial  effort,  including  activities  that  aim  to  coordinate  the  sourcing  or 
stockpiling  of  defence  products,  components  and 
reservation  and 
corresponding raw materials insofar as those components and raw materials are 
intended or used wholly for the production of defence products,  as well as to 
coordinate production capacities and production plans; 

the  building-up  and  making  available  of  reserved  surge  manufacturing 
capacities  (ever  warm  facilities)  of  defence  products,  their  components  and 
corresponding  raw  materials,  insofar  as  those  components  and  raw  materials 
are  intended  or  used  wholly  for  the  production  of  defence  products,  in 
accordance with ordered or planned production volumes; 

fostering industrialisation and commercialisation of defence products that have 
been  developed  in  the  framework  of  actions  funded  by  the  Union  or  other 
cooperative  activities  conducted  with  support  by  at  least  two  Member  States 
including  through  the  establishment  of  cross-border  industrial  partnerships, 
public private partnerships or other forms of industrial cooperation, ramping-up 
of initial production as well as licensing production, where appropriate; 

(e) 

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

Activities  aiming  at  supporting  the  deployment  of  a  European  Defence  Project  of 
Common Interest. 

Supporting activities (‘support actions’) may cover: 

(a) 

(b) 

(c) 

(d) 

activities that aim to increase interoperability and interchangeability, including 
the  cross  certification  of  defence  products  and  activities  leading  to  mutual 
recognition  of  certification  or  to  facilitate  the  implementation  of  military 
standards; 

activities  to  strengthen  security  of  supply  and  resilience,  in  particular  by 
facilitating  the  access  to  the  defence  market  for  SMEs,  small  mid-caps, other 
mid-caps  and  start-ups  and  support  to  obtain  the  necessary  quality  and 
production certifications; 

the  training,  reskilling  or  upskilling  of  personnel  in  relation  to  the  activities 
referred to in this Article; 

the  procurement  of  physical  and  cyber  protection  systems  in  relation  to  the 
activities referred to in paragraph 3, including effective engagement; 

4. 

5. 

EN 

36 

  EN 

6. 

7. 

8. 

(e) 

coordination and (technical) support actions, in particular addressing identified 
bottlenecks in production capacities and supply chains with a view to securing 
and  accelerating  the  production  of  crisis-relevant  products  in  order  to  ensure 
their effective supply and timely availability; 

(f)  Union  support  to  Structures  for  European  Armament  Programme  notably  for 
the purpose of managing and maintaining a Defence Industrial Readiness Pool 
as referred to in Article 14(1), point (b); 

(g)  Emergency  activities,  including  emergency  defence  innovation  where  the 

measure referred to in Article 52 is activated. 

For activities referred to in paragraphs 2, in paragraph 3, point (d), and in paragraph 
55,  point  (a),  the  action  shall  be  carried  out  by  legal  entities  cooperating  within  a 
consortium  of  at  least  three  eligible  legal  entities  which  are  established  in  at  least 
three different Member States or associated countries. At least three of those eligible 
legal  entities  established  in  at  least  two  different  Member  States  or  associated 
countries  shall  not,  during  the  entire  period  in  which  the  action  is  carried  out,  be 
controlled, directly or indirectly, by the same legal entity and shall not control each 
other. 

By  derogation  from  paragraph  6,  the  action  may  be  carried  out  by  a  Structure  for 
European Armament Programme.  

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

(a) 

(b) 

(c) 

actions  related  to  goods  or  services  which  are  prohibited  by  applicable 
international law; 

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

actions related to goods or services which are subject to control or restriction 
by  non-associated  third  countries  or  by  non-associated  third-country  entities, 
directly, or indirectly through one or more intermediate legal entities, including 
in terms of technology transfer; 

(d) 

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

Article 12 

Specific provisions applicable for common procurement actions 

1. 

Only the following legal entities shall be eligible for funding under the Programme: 

(a) 

public contracting authorities of Member States or associated countries; 

(b) 

International Organisations; 

(c) 

the Structures for European Armament Programme; 

(d) 

the European Defence Agency. 

2. 

Member States and associated countries participating in a common procurement shall 
appoint,  by  unanimity,  an  eligible  legal  entity  as  procurement  agent  to  act  on  their 
behalf  for  the  purposes  of  that  common  procurement.  The  procurement  agent  shall 

EN 

37 

  EN 

carry  out  the  procurement  procedures  and  conclude  the  resulting  contracts  with 
contractors  on  behalf  of  the  participating  countries.  The  procurement  agent  may 
participate  in  the  action  as  a  beneficiary  and  may  act  as  the  coordinator  of  the 
consortium  and  may  therefore  be  able  to  manage  and  combine  funds  from  the 
Programme  and  funds  from  the  participating  Member  States  and  associated 
countries. 

This  Regulation  is without prejudice to  the  rules  on the coordination of procedures 
for  the  award  of  certain  works  contracts,  supply  contracts  and  service  contracts  by 
contracting  authorities/entities  in  the  fields  of  defence  and  security  laid  down  in 
Directive 2009/81/EC. 

The  procurement  procedures  referred  to  in  paragraph  2  shall  be  based  on  an 
agreement to be signed by the participating Member States and associated countries 
with the procurement agent under the conditions set out in the work programme. The 
agreement  shall,  in  particular,  determine  the  practical  arrangements  governing  the 
common  procurement  and  the  decision-making  process  on  the  choice  of  the 
procedure, the assessment of the tenders and the award of the contract. 

The procurement  agent  shall apply  conditions  equivalent  to  those set  out  in  Article 
10,  mutatis  mutandis,  to  procurement  procedures  and  in  contracts  with  contractors 
and subcontractors in the common procurement. 

Procurement  agents  shall  provide  the  Commission  with  guarantees  and  mitigation 
measures  referred  to  in  Article  10(6).  Further  information  on  the  guarantees  and 
mitigation  measures  shall  be  made  available  to  the  Commission  upon  request.  The 
Commission shall inform the committee referred to in Article 58 of any notification 
provided in accordance with this paragraph. 

The common procurement  contract  shall include provisions governing the purchase 
of  additional  quantities  of  defence  products  for  other  Member  States,  associated 
countries or Ukraine.  

Such  rules  shall  be  without  prejudice  to  applicable  Union  law  and  be  in  line  with 
Member  States’  national  laws  and  regulations  relating  to  the  export  of  defence-
related products.  

Article 13 

Specific provisions applicable for industrial reinforcement actions 

For activities referred to in Article 11(3), point (a), (b) and (c), in order to be eligible 
for  funding  actions  shall  be exclusively related  to  the  production capacities of 
defence  products,  including their components  and  raw  materials insofar  as  they  are 
intended or used wholly for the production of defence products.  

These actions shall be without prejudice to Union competition rules, and in particular 
Article 101 Treaty on the Functioning of the European Union (TFEU). 

3. 

4. 

5. 

6. 

7. 

1. 

2. 

EN 

38 

  EN 

Article 14 

Specific provisions applicable for activities contributing to a European Military Sales 
Mechanism 

1. 

To  ensure  the  availability  of  EU  defence  products  in  time  and  in  volume  thereby 
fostering  the  competitiveness  of  the  EDTIB  as  well  as,  where  relevant,  of  the 
Ukrainian  DTIB,  the  Commission  shall  support  the  following  set  of  measures  (EU 
MSM):  

(a) 

(b) 

(c) 

(d) 

the  establishment  of  a  single,  centralised,  up  to  date  catalogue  of  defence 
products developed by the EDTIB; 

the creation of a defence industrial readiness pool, to increase availability and 
speed up delivery time of EU-made defence products,  ensuring  an  immediate 
and  preferential  purchase  or  use/lease  option  for  Member  States,  associated 
countries and Ukraine; 

the  facilitation  and  speeding  up  of  procurement  procedures  in  a  spirit  of 
solidarity; 

the support to administrative capacity building related to public procurement of 
defence products, with the aim of facilitating joint procurement. 

The  Commission  shall  draw  up  the  technical  specifications  for  and  procure  the 
corporate IT platform required to establish the catalogue referred to in paragraph 1, 
point (a) of this Article based on consultations with the Defence Industrial Readiness 
Board. 

Where Member States jointly procure additional quantities or contribute through in-
kind  contributions  to  build  up  a  defence  industrial  readiness  pool  as  referred  to  in 
paragraph  2,  point  (b),  in  the  context  of  a  Structure  for  European  Armament 
Programme, the Commission shall financially support the initiative through:  

(a) 

(b) 

support  to  common  procurement  of  additional  quantities  as  referred  to  in 
Article 11(2); 

contribution  to  the  direct  and  indirect  costs  of  managing  and  maintaining  the 
Defence Industrial Readiness Pool as referred to in Article 11(5), point (f); 

(c) 

contribution to administrative capacity building as referred to in Article 11(5). 

For the purpose of Member States, associated countries or Ukraine buying from the 
defence  industrial  readiness  pool  managed  by  a  Structure  for  European  Armament 
Programme,  the  procurement  shall  be  considered  as  a  government-to-government 
contract as referred to in Article 13, point (f) of Directive 2009/81/EC.  

Article 15 

2. 

3. 

4. 

Specific provisions applicable for activities contributing to European Defence Projects of 
Common Interest 

1. 

2. 

The  Commission  may  identify  European  Defence  Projects  of  Common  Interest  for 
funding in the work programme referred to in Article 18. 

The Commission shall, when identifying projects referred to in paragraph 1: 

EN 

39 

  EN 

(a) 

duly  consider  the  guidance  provided  in  the  context  of  the  Defence  Industrial 
Readiness Board, in particular the contribution of the project to the capability 
priority  identified  in  the  context  of  the  CFSP,  notably  of  the  Capability 
Development  Plan,  and  the  objectives  of  the  Strategic  Compass  for  security 
and defence; 

(b) 

identify overall financing needs and potential impacts for the Union budget; 

(c) 

take into account any views of Member States. 

3. 

European  Defence  Projects  of  Common  Interest  shall  meet  the  following  general 
criteria: 

4. 

5. 

6. 

7. 

8. 

(a) 

the project aims at developing capabilities, including those securing access to 
strategic domains and contested spaces, strategic enablers, and, as appropriate, 
systems acting as European defence infrastructure of common interest and use; 

(b) 

the potential overall benefits of the project outweigh its costs, including in the 
longer term. 

A European Defence Project of Common Interest shall involve at least four Member 
States. The European Commission shall be able, where relevant, to participate in the 
project. 

A European Defence Project of Common Interest shall be considered to contribute to 
the  defence  capabilities  critical  for  the  security  and  defence  interests  of  the  Union 
and  its  Member  States  and  therefore  to  be  in  the  public  interest.  They  may  be 
established  in  the  framework  of  Structures  for  European  Armament  Programmes 
referred to in Chapter 3. 

Member States may, without prejudice to Articles 107 and 108 TFEU, apply support 
schemes  and  provide  for  administrative  support  to  European  Defence  Projects  of 
Common Interest. 

The  Union  financial  contribution  referred  to  in  Article  17  shall  not  exceed  25%  of 
the amount referred to in Article 5(1). 

The  deployment  of  European  Defence  Projects  of  Common  Interest  may  be 
considered an imperative reason of overriding public interest within the meaning of 
Article  6(4)  and  Article  16(1),  point  (c),  of  Directive  92/43/EEC  and  of  overriding 
public  interest  within  the  meaning  of  Article  4(7)  of  Directive  2000/60.  Therefore, 
the  planning,  construction  and  operation  of  related  production  facilities  may  be 
considered of overriding public interest, provided that the remaining other conditions 
set out in these provisions are fulfilled. 

Article 16 

Award criteria 

1. 

Each proposal shall be assessed on the basis of the following criteria: 

(a) 

industrial  readiness:  contribution 

increase 
defence 
production  capacities,  reduce  lead  times,  eliminate  bottlenecks  thereby 
increasing interoperability and interchangeability; 

to  competitiveness, 

(b)  defence  industrial  resilience:  contribution  to  resilience,  increase  timely 
availability  and  supply  to  all  locations,  strengthening  security  of  supply 

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2. 

1. 

2. 

throughout  the  Union  in  response  to  identified  risks,  including  in  particular 
high  exposure  to  the  risk  of  materialisation  of  conventional  military  threats, 
and the non-dependency on non-associated third country sources. 

(c) 

defence industrial cooperation: fostering genuine armament cooperation among 
Member  States,  associated  countries  or  Ukraine  and  development  and 
operationalisation  of 
cross-border  cooperation  between  undertakings 
established  in  different  Member  States,  associated  countries  or  Ukraine, 
involving in particular, to a significant extent, SMEs, small mid-caps and other 
mid-caps as recipients, as subcontractors or as other undertakings in the supply 
chain; 

(d) 

the quality of the implementation plan of the action, in particular measures to 
respect delivery lead times, including in terms of its processes and monitoring. 

The work programme shall lay down further details concerning the application of the 
award criteria laid down in paragraph 1, including any weighting to be applied. The 
work programme shall not set individual thresholds. 

Article 17 

Union financial contribution 

By  way  of  derogation  from  Article  190  of  the  Regulation  (EU,  Euratom)  No 
2018/1046, the Programme may finance up to 100 % of the eligible costs. However, 
for activities referred to  in  Article 11(3) the support from  the Programme shall not 
exceed 35 % of the eligible costs. 

An action shall be eligible for an increased funding rate where it fulfils one or more 
of the following criteria: 

(a) 

the  action  is  developed  in  the  context  of  a  Structure  for  European  Armament 
Programme  SEAP,  as  referred  to  in  Chapter  III  of  this  Regulation  or  in  the 
context  of  a  project  of  PESCO,  provided  that  this  project  complies  with 
obligations  comparable  to  those  under  Article  22(1),  23(1),  25  and  26  of  this 
Regulation and that it did not benefit from a comparable increased funding rate 
in another EU funding programme;  

(b)  Ukraine  is  the  recipient  of  defence  products  produced  or  procured  under  the 
Programme  and  those  products  are  subject  to  financial  support  under  the 
European Peace Facility; 

(c)  Member  States  agree  on  a  common  approach  to  exports  for  defence  products 
developed and procured in the context of a Structure for European Armament 
Programme (SEAP);  

(d) 

the  beneficiary  is  an  SME  or  small  mid-cap  or  the  majority  of  beneficiaries 
participating in a consortium are SMEs or small mid-caps. 

3. 

The  work  programme  shall  lay  down  further  details,  including,  where  relevant,  the 
increased funding rates referred to in paragraph 3. 

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Article 18 

Work programmes 

1. 

2. 

1. 

The Programme shall be implemented by work programmes as referred to in Article 
110 of the Regulation (EU, Euratom) No 2018/1046. Work programmes shall set out 
the actions and associated budget required to meet the objectives of the Programme 
and, where applicable, the overall amount reserved for blending operations. 

The  Commission  shall  adopt  work  programmes  by  means  of  implementing  acts. 
Those  implementing  acts  shall  be  adopted  in  accordance  with  the  examination 
procedure referred to in Article 58(3). 

Article 19 

Fund to Accelerate defence Supply chains Transformation (FAST) 

In order to leverage, de-risk and speed-up investments needed to increase the defence 
manufacturing capacities of SMEs and small mid-caps, a blending operation offering 
debt and/or equity support may be established (Fund to Accelerate defence Supply-
chains’ Transformation (FAST). It shall be implemented in accordance with Title X 
of the Regulation (EU, Euratom) No 2018/1046 and Regulation (EU) 2021/5237.  

2. 

The specific objectives pursued by the FAST shall be the following:  

(a) 

achieve a satisfactory multiplier effect in line with the debt and equity mix and 
contributing to attracting both public and private-sector financing; 

(b)  provide support to SMEs (including start-ups and scale-ups) and small midcaps 
across the Union, which are facing difficulties in accessing finance and which:  

(i)  industrialise  defence  technologies  and/or  manufacture  defence  products  or 

have imminent plans to so; or 

(ii) are part of the defence industry’s supply chain or have imminent plans to 

become part it.  

(c) 

accelerate  investment  in  the  field  of  manufacturing  defence  technologies  and 
products,  and  therefore  strengthen  the  security  of  supply  of  the  Union’s 
defence industry value chains. 

Section 3: The Ukraine Support Instrument 

Article 20 

Specific provisions applicable to the Ukraine Support Instrument 

Article  13  shall  apply  to  actions  under  the  Ukraine  Support  Instrument.  Articles  8, 
11, 12, 14, 16, 17 and Article 18 shall apply mutatis mutandis.  

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, ELI: http://data.europa.eu/eli/reg/2021/523/oj).  

1. 

7 

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42 

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2. 

3. 

4. 

1. 

2. 

3. 

4. 

5. 

By derogation from Article 17(1) activities referred to in Article 11(3) may finance 
up to 100 % of the eligible costs. 

References to associated countries in Articles 8, 9, 11, 12, 14 and 16 shall not apply 
to this section. 

References to blending operations in Articles 8 shall not apply to this section. 

Article 21 

Eligible legal entities 

The  eligibility  criteria  set  out  in  paragraphs  2  to  7  shall  apply  in  addition  to  the 
criteria set out in accordance with Regulation (EU, Euratom) 2018/1046. 

Recipients of Union funding shall be established in the Union or in Ukraine. 

The infrastructure, facilities, assets and resources of the recipients which are used for 
the purposes of the action shall be located on the territory of a Member State or of 
Ukraine.  Where  recipients  have  no  readily  available  alternatives  or  relevant 
infrastructure,  facilities,  assets  and  resources  in  the  Union  or  in  Ukraine,  they  may 
use  their  infrastructure,  facilities,  assets  and  resources  which  are  located  or  held 
outside the territory of the Member States or of Ukraine, provided that such use does 
not contravene the security and defence interests of the Union and the Member States 
and is consistent with the objectives set out in Article 4. 

For  the  purposes  of  an  action  supported  by  the  Ukraine  Support  Instrument,  the 
recipients  shall  not  be  subject  to  control  by  a  third  country  or  by  a  third-country 
entity. 

By way of derogation from paragraph 4, a legal entity established in the Union and 
controlled  by  a  third  country  or  a  third-country  entity  shall  be  eligible  to  be  a 
recipient  if it has been subject  to  screening  within the meaning  of Regulation (EU) 
2019/452  of  the  European  Parliament  and  of  the  Council  and,  where  necessary,  to 
mitigation  measures,  taking  into  account  the  objectives  set  out  in  Article  4  of  this 
Regulation, or if guarantees approved by the Member State in which it is established 
in accordance with its national procedures are made available to the Commission.  

The guarantees shall provide assurances that the involvement in an action of such a 
legal entity 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  Treaty  on  European  Union  (TEU),  or  the  objectives  set  out  in  Article  4.  The 
guarantees  shall  also  comply  with  Article  11(8),  point  (c).  The  guarantees  shall  in 
particular  substantiate  that,  for  the  purposes  of  an  action,  measures  are  in  place  to 
ensure that: 

(a) 

(b) 

control  over  the  legal  entity  is  not  exercised  in  a  manner  that  restrains  or 
restricts  its  ability  to  carry  out  the  action  and  to  deliver  results,  that  imposes 
restrictions  concerning 
resources, 
infrastructure, 
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 

access by a third country or by a third-country entity to sensitive 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, where 
appropriate; 

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6. 

If  considered  to  be  appropriate  by  the  Member  State  in  which  the  legal  entity  is 
established, additional guarantees may be provided. 

The  Commission  shall  inform  the  committee  referred  to  in  Article  57  of  any  legal 
entity considered to be eligible in accordance with this paragraph. 

When  carrying  out  an  eligible  action,  recipients  may  also  cooperate  with  legal 
entities  established  outside  the  territory  of  the  Member  States  or  of  Ukraine,  or 
controlled  by  a  third  country  or  by  a  third-country  entity,  including  by  using  the 
assets, infrastructure, facilities and resources of such legal entities, provided that this 
does not contravene the security and defence interests of the Union and its Member 
States.  Such cooperation shall be consistent with the objectives set  out  in  Article 4 
and comply with Article 11(8), point (c). 

There shall be no unauthorised access by a third country, or other third-country entity 
to  classified  information  relating  to  the  carrying  out  of  the  action  and  potential 
negative  effects  over  security  of  supply  of  inputs  critical  to  the  action  shall  be 
avoided. 

The  costs  related  to  those  activities  shall  not  be  eligible  for  support  from  the 
Programme. 

7. 

Paragraphs 2 to 6 shall not apply to:  

(a) 

contracting authorities of Member States and Ukraine; 

(b) 

International Organisations; 

(c)  The Structures for European Armament Programme; 
(d)  The European Defence Agency. 

Chapter III 

Structure for European Armament Programme 

Article 22 

Specific objective and activities of SEAP 

1. 

2. 

the 
A  Structure  for  European  Armament  Programme  (SEAP)  shall  foster 
competitiveness  of  the  EDTIB  and  of  the  Ukrainian  DTIB  by  aggregating  the 
demand for defence products throughout their lifecycle.  

To reach the objective referred to in paragraph 1, the principal tasks of a SEAP shall 
be:  

(a) 

(b) 

the  common  procurement  of  defence  products,  technologies  or  services, 
including  defence  R&D,  testing  and  certification,  non-recurrent  investments 
related to initial production or in-service support;   

the joint life-cycle management of defence products, including the procurement 
of spare parts, logistic services and, where appropriate, establishment of public 
private  partnerships  to  ensure  efficiency  and  high  availability  of  defence 
products;  

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(c) 

the  dynamic  availability  management  for  additional  quantities,  ensuring  an 
immediate  and  preferential  purchase  or  use/lease  option  for  Member  States, 
associated countries or Ukraine (Defence Industrial Readiness Pool).  

Article 23 

Requirements relating to the establishment of a SEAP 

1. 

A SEAP shall meet the following requirements: 

2. 

1. 

(a) 

(b) 

(c) 

(d) 

a  SEAP  shall  support  the  collaborative  development  and  procurement  of 
defence  products  and  services  in  line  with  the  capability  priorities  commonly 
agreed by Member States within the framework of the CFSP, including in the 
context of the Capability Development Plan; 

a  SEAP  shall  be  established  by  at  least  three  Member  States,  associated 
countries or Ukraine.  

a SEAP shall have as members at least two Member States; 

a SEAP shall continue the lifecycle of the defence product or technology, until 
its decommissioning. 

A  SEAP  shall  use  standardised  procedures  for  initiating  and  managing  cooperative 
defence  programmes  and  shall  respect  any  guidance  or  templates  provided  to  it  by 
the  Commission,  including  guidelines  on  project  management,  funding,  and 
reporting.  

Article 24 

Application for the establishment of a SEAP 

The Member States applying for the setting-up of a SEAP (as the 'applicants’) shall 
submit  an  application  to  the  Commission.  The  application  shall  contain  the 
following:  

(a) 

(b) 

(c) 

(d) 

a request to the Commission to set up the SEAP;  

the proposed Statutes of the SEAP referred to in Article 27, signed and adopted 
in due form by all legal entities that are applicants to the proposed SEAP;  

a  description  of  the  defence  equipment,  technology  or  service  to  be  jointly 
procured and managed by the SEAP, addressing in particular the requirements 
set out in Article 23(1), point (a) and (d);  

a  declaration  by  the  host  Member  State  recognising  the  SEAP  as  an 
international  body  within  the  meaning  of  Articles  143(1)(g)  and  151(1)(b)  of 
Directive 2006/112/EC and as international organisation within the meaning of 
Article 11(1) of Directive (EU) 2020/262,  as  of its setting  up. The limits  and 
conditions  of  the  exemptions  provided  for  in  these  provisions  shall  be  laid 
down in an agreement between the members of the SEAP.  

2. 

The Commission shall assess the application in line with the requirements laid down 
in  this  Regulation.  The  result  of  such  assessment  shall  be  communicated  to  the 
applicants who shall, if necessary, be invited to complete or amend the application. 

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45 

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3. 

4. 

5. 

1. 

2. 

3. 

The Commission shall, taking into account the results of the assessment referred to in 
paragraph 2 and in accordance with the procedure referred to in Article 58(3), adopt 
an implementing act: 

(a) 

(b) 

setting up the SEAP after it has satisfied itself that the requirements laid down 
in this Regulation are met; or 

reject  the  application  if  it  concludes  that  the  requirements  laid  down  in  this 
Regulation are not met, including in the absence of the declaration referred to 
in paragraph (1) (d). 

The  decision  on  the  application  shall  be  notified  to  the  applicants.  In  the  case  of  a 
rejection, the decision shall be explained in clear and precise terms to the applicants. 

The  decision  setting  up  the  SEAP  shall  be  published  in  the  L  series  of  the Official 
Journal of the European Union. 

Article 25 

Status and seat of a SEAP 

A SEAP shall have legal personality as from the date on which the decision setting 
up the SEAP takes effect. 

A SEAP shall have in each Member State the most extensive legal capacity accorded 
to  legal  entities  under the law of that Member State.  It  may, in particular conclude 
contracts  and  be  a  party  to  legal  proceedings.  All  Member  State  national  funding 
agencies  shall  consider  it  (and  its  national  nodes)  an  eligible  recipient  of  national 
financial contributions. 

A  SEAP  shall  have  a  statutory  seat,  which  shall  be  located  on  the  territory  of  a 
Member State. 

Article 26 

Requirements for membership 

1. 

The following legal entities may become members of a SEAP:  

(a)  Member States;  

(b) 

associated countries; 

(c)  Ukraine. 

2. 

3. 

Member  States,  associated  countries  or  Ukraine  may  join  as  members  at  any  time 
after  the  establishment  of  the  SEAP  on  fair  and  reasonable  terms  specified  in  the 
Statutes referred to in Article 27 and as observers without voting rights on conditions 
specified in the Statutes.  

A  SEAP  may  also  cooperate  with  non-associated  third  countries  or  non-associated 
third  country  entities,  including  by  using  the  assets,  infrastructure,  facilities  and 
resources, provided that this does not contravene the security and defence interests of 
the Union and its Member States.  

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Article 27 

Statutes 

1. 

The Statutes of a SEAP shall contain at least the following:  

(a) 

(b) 

(c) 

a  list  of  members,  observers  and,  where  applicable,  of  legal  entities 
representing members and the conditions of and the procedure for changes in 
membership and representation in compliance with Article 26; 

the specific objective, the tasks and activities of the SEAP, in compliance with 
Article 23; 

 a  list  of  the  jointly  procured  defence  equipment,  technology  and/or  services 
which are to be jointly owned, if any, and eligible for an exemption from VAT 
and/or Excise Duties; 

(d) 

the statutory seat of the SEAP in compliance with Article 25; 

(e) 

(f) 

(g) 

(h) 

(i) 

the name of the SEAP; 

the duration, and the procedure for the winding-up of the SEAP in compliance 
with Article 32;  

the liability regime, in compliance with Article 30; 

the  rights  and  obligations  of  the  members,  including  the  obligation  to  make 
contributions to a balanced budget and voting rights;  

the  bodies  of  the  members,  their  roles  and  responsibilities  and  the  manner  in 
which  they  are  constituted  and  in  which  they  decide,  including  upon  the 
amendment of the Statutes, in compliance with Articles 28,  

(j) 

the identification of the working language(s) of the SEAP; 

(k) 

references to rules implementing the Statutes; 

(l) 

the security policy for handling classified information. 

In  addition,  where  the  members  of  a  SEAP  decide  to  use/manage  a  Defence 
Industrial  Readiness  Pool  referred  to  in  Article  14(1),  point  (b),  the  statutes  shall 
include the rules governing the management of a Defence Industrial Readiness Pool 
referred to in Article 14(1), point (b), including, where relevant, a common approach 
to export. 

Article 28 

Amendment of the Statutes 

Any amendment of the Statutes concerning the matters referred to in Article  27(1), 
points  (a)  to  (h),  shall  be  submitted  to  the  Commission  by  the  SEAP  for  approval. 
The Commission shall apply Articles 24(2), mutatis mutandis. 

Any  amendment  of  the  Statutes  other  than  that  referred  to  in  paragraph  1  shall  be 
submitted to the Commission by the SEAP within 10 days after its adoption. 

The  Commission  may  raise  an  objection  to  amendments  referred  to  in  paragraph  1 
within  60  days  from  the  submission  giving  reasons  why  the  amendment  does  not 
meet the requirements of this Regulation. 

2. 

1. 

2. 

3. 

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47 

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4. 

5. 

1. 

2. 

3. 

4. 

1. 

2. 

3. 

The amendment  shall not  take effect  before the  period for objecting has  expired or 
has been waived by the Commission or before an objection raised has been lifted. 

The application for the amendment shall contain the following: 

(a) 

the  text  of  the  amendment  proposed  or,  where  appropriate,  the  text  of  the 
amendment as adopted, including the date on which it enters into force; 

(b) 

the amended consolidated version of the Statutes. 

Article 29 

Specific conditions on procurement 

A SEAP may appoint a Procurement Agent which will act in its name.  

When  procuring  for  a  SEAP,  the  Procurement  Agent  shall  be  bound  by  the  same 
rules as the SEAP concerned. 

Where it procures a defence product on its own behalf and in its own name, a SEAP 
shall  be  considered  as  an  international  organisation  within  the  meaning  of  Article 
12(c) of Directive 2009/81/EC. Where it procures a defence product on behalf of its 
members, a SEAP shall, by derogation to Article 10 of Directive 2009/81/EC,  define 
its  own  rules  in  lines  with  the  principles  of  transparency,  non-discrimination  and 
competition. 

Procurements  of  a  SEAP  shall  comply  with  the  requirements  set  out  in  Article  12 
paragraphs 3 to 6. 

Article 30 

Liability and insurance 

A SEAP shall be liable for its debts.  

The financial liability of the members for the debts of the SEAP shall be limited to 
their respective contributions provided to the SEAP. The members may specify in the 
Statutes that they will assume a fixed liability above their respective contributions or 
unlimited liability. 

If the financial liability of the members is  limited, the SEAP shall take appropriate 
insurance  to  cover  the  risks  specific  to  the  establishment  and  management  of  the 
capability.  

4. 

The Union shall not be liable, including for any debt of the SEAP. 

Article 31 

Applicable law and jurisdiction 

1. 

The setting-up and internal functioning of a SEAP shall be governed: 

(a) 

by Union law, in particular this Regulation, and the implementing acts referred 
to in Article 24(3)(a); 

(b)  by  the  law  of  the  State  where  the  SEAP  has  its  statutory  seat  in  the  case  of 

matters not, or only partly, regulated by acts referred to in point (a); 

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48 

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2. 

3. 

1. 

2. 

3. 

4. 

1. 

2. 

3. 

(c) 

by the Statutes and their implementing rules. 

The  Court  of  Justice  of  the  European  Union  shall  have  jurisdiction  over  litigation 
among  the  members  in  relation  to  the  SEAP,  between  the  members  and  the  SEAP 
and over any litigation to which the Union is a party.   

Union  legislation  on  jurisdiction  shall  apply  to  disputes  between  a  SEAP  and  third 
parties.  In  cases  not  covered  by  Union  legislation,  the  law  of  the  State  where  the 
SEAP  has  its  statutory  seat  shall  determine  the  competent  jurisdiction  for  the 
resolution of such disputes. 

Article 32 

Winding up and insolvency 

The Statutes shall determine the procedure to be applied in the case of winding-up of 
the  SEAP  following  a  decision  of  the  assembly  of  members  or  in  case  the 
Commission  repeals  the  implementing  act  establishing  the  SEAP,  as  referred  to  in 
Article  33(6).  Winding-up  may  include  the  transfer  of  activities  to  another  legal 
entity.  

Without undue delay after the adoption of a decision by the assembly of members to 
wind up the SEAP, and in any event within 10 days after such adoption, the SEAP 
shall  notify  the  Commission  thereof.  The  Commission  shall  publish  an  appropriate 
notice  of  the  decision  to  wind-up  in  the  C  series  of  the  Official  Journal  of  the 
European Union.  

Without undue delay after the closure of the winding-up procedure, and in any event 
within  10  days  after  such  closure,  the  SEAP  shall  notify  the  Commission  thereof. 
The Commission shall publish an appropriate notice of the closure in the C series of 
the Official Journal of the European Union. The SEAP shall cease to exist on the day 
of publication of the notice.  

At  any  time,  in  the  event  that  the  SEAP  is  unable  to  pay  its  debts,  it  shall 
immediately  notify  the  Commission  thereof.  The  Commission  shall  publish  an 
appropriate  notice  hereof  in  the  C  series  of  the  Official  Journal  of  the  European 
Union.  

Article 33 

Reporting and control 

A  SEAP  shall  produce  an  annual  activity  report,  containing  a  technical  description 
and a financial report of its activities referred to in Article 22. It shall be transmitted 
to the Commission within six months from the end of the financial year.  

The Commission may provide recommendations to the SEAP regarding the matters 
covered in the annual activity report. 

A  SEAP  and  the  Member  States  concerned  shall  inform  the  Commission  of  any 
circumstances which threaten to seriously jeopardise the achievement of the task of 
the SEAP  or to  hinder the  SEAP from  fulfilling the requirements  laid down in  this 
Regulation.  

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49 

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4. 

5. 

6. 

1. 

2. 

3. 

Where the Commission obtains indications that a SEAP is acting in serious breach of 
this Regulation, the implementing act establishing it, its statutes or other applicable 
law, it shall request explanations from the SEAP and/or its members. 

Where the Commission concludes, after having given the SEAP and/or its members a 
reasonable  time  to  provide  their  observations,  that  the  SEAP  is  acting  in  serious 
breach  of  this  Regulation,  the  implementing  act  establishing  it,  its  statutes  or  other 
applicable law, it may propose remedial action to the SEAP and its members.  

Where no remedial action is taken, the Commission may repeal the implementing act 
establishing  the  SEAP.  The  repealing  act  shall  be  published  in  the  L  series  of  the 
Official Journal  of the European Union.  The publication of the act  shall trigger the 
winding-up of the SEAP. 

Chapter IV 

Security of supply 

SECTION 1 

PREPAREDNESS 

Article 34 

Conditions to open framework agreements to other Member States 

Where  at  least  two  Member  States  enter  into  an  agreement  to  commonly  procure 
defence products and where the extreme urgency of the situation justifies it, the rules 
provided for in paragraphs 2 to 6 may be applied to framework agreements that do 
not  include  rules  governing  the  possibility  to  substantially  amend  it  so  that  its 
provisions may apply to contracting authorities/entities which are not originally party 
to the framework agreement.  

By  way  of  derogation  from  Article  29(2),  second  subparagraph,  of  Directive 
2009/81/EC,  a  contracting  authority/entity  may  modify  an  existing  framework 
agreement with an undertaking complying with the provisions laid out in Article 10, 
paragraphs  1  and  2,  which  has  been  concluded  following  one  of  the  procedures 
provided  for  by  Article  25  of  that  Directive  so  that  its  provisions  may  apply  to 
contracting  authorities/entities  which  are  not  originally  party  to  the  framework 
agreement. 

By  way  of  derogation  from  Article  29(2),  third  subparagraph,  of  Directive 
2009/81/EC, a contracting authority/entity may make substantial amendments to the 
quantities  laid  down  in  an  existing  framework  agreement  with  an  undertaking 
complying with the provisions laid out in Article 10, paragraphs 1 and 2, insofar as 
that  is  strictly  necessary  for  the  application  of  paragraph  2  of  this  Article.  Where 
quantities laid down in an existing framework agreement are substantially modified 
pursuant  to  this  paragraph,  any  economic  operator  that  meets  the  contracting 
authority’s/entity’s  conditions  initially  laid  down  in  the  public  procurement 
procedure  for  the  framework  agreement,  including  requirements  for  qualitative 
selection  as  referred  to  in  Articles  39  to  46  of  Directive  2009/81/EC,  and  which 

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complies with the provisions laid out in Article 10, paragraphs 1 and 2, shall be given 
the  opportunity  to  join  that  framework  agreement.  The  contracting  authority/entity 
shall  open  that  possibility  by  means  of  an  ad  hoc  notice  published  in  the  Official 
Journal of the European Union. 

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

Contracting  authorities  which  modified  a  contract  in  the  cases  referred  to  in 
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 the possibility provided for in paragraph 
2 and 3 improperly or in such a way as to prevent, restrict or distort competition. 

4. 

5. 

6. 

Article 35 

Procurement 

1. 

By  derogation  to  [Article  168  of  the  Financial  Regulation  recast],  Member  States, 
associated countries and, where relevant, Ukraine may request the Commission:  

(a) 

(b) 

to engage in a joint procurement with them as as referred to in [Article 168(2) 
of the  Financial  Regulation  recast]  whereby  Member  States,  associated 
countries  or  Ukraine  may  acquire,  rent  or  lease  fully  the  defence  products 
jointly procured;  

to  act  as  a  central  purchasing  body  to  procure  on  behalf  of  the  interested 
Member  States  or  in  their  name  defence  products,  as  referred  to  in  [Article 
168(3) of the Financial Regulation recast]. 

2. 

The  procurement  procedure  referred  to  in  paragraph  1,  shall  comply  with  the 
following conditions: 

(a) 

(b) 

(c) 

participation  in  launching  the  procurement  procedure  shall  be  open  to  all 
Member States,  associated  countries  and Ukraine, by way of derogation from 
[Article 168(2) and (3) of the Financial Regulation recast]; 

the  Commission  invites  at  least  4  experts  with  relevant  experience  for  the 
negotiations  from  participating  countries  with  production  capacities  for  the 
concerned defence product to form a joint negotiation team; 

participating  countries  explicitly  state  whether  they  decide  to  run  parallel 
negotiation processes for that product. The decision to run parallel negotiation 
processes  for  that  product  shall  be  subject  to  unanimous  approval  by 
participating countries; 

3. 

As  part  of  the  procurement  referred  to  in  paragraph  1(b),  the  Commission  may 
procure relevant components and raw materials of defence products for the purpose 
of building strategic reserves. 

When duly justified by the extreme urgency of the situation the Commission may, by way of 
derogation from Article 172(1) of Regulation (EU, Euratom) 2018/1046,  request the delivery 
of goods or services from the date on which the draft contracts resulting from the procurement 

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carried out for the purposes of this Regulation are sent, which shall be no later than 24 hours 
as from the award. 

4. 

5. 

6. 

7. 

8. 

1. 

2. 

3. 

1. 

In order to enter into purchase agreements with economic operators, representatives 
of the Commission, or experts nominated by the Commission, may carry out on-site 
visits in cooperation with relevant national authorities at the locations of production 
facilities of relevant defence products. 

Ownership and export of defence products purchased under this Article shall remain 
the competence of the participating countries.  

The  Commission  shall  ensure  that  participating  countries  are  treated  equally  when 
carrying  out  the  procurement  procedures  and  when  implementing  the  resulting 
agreements. 

The use of procurement pursuant to paragraph 1 shall be without prejudice to other 
instruments provided for in the Financial Regulation. 

In  addition  to  the  conditions  set  out  in  the  Financial  Regulation,  eligibility  criteria 
equivalent  to  those  laid  down  in  Article  10  of  this  Regulation  shall  apply,  mutatis 
mutandis, to tenderers, contractors and subcontractors in contracts resulting from the 
procurement conducted pursuant to this Article. 

Article 36 

Advance Purchase of defence products 

Joint purchasing referred to in Article 35 may take the form of advanced purchasing 
agreements of defence products negotiated and concluded in the name and on behalf 
of participating  countries.  Those agreements  may include a prepayment  mechanism 
for the production of such products in exchange for the right to the result, which shall 
not exceed the parts of the contract on non-recurrent costs and/or the reservation of 
manufacturing capacities. 

Where the agreements referred to in paragraph 1 of this Article include a prepayment 
mechanism, the up-front payment to the contractor shall be covered by the financial 
envelope referred to Article 5(1). Contributions of participating countries as referred 
to  in  Article  6  shall  be  taken  into  account  in  equal  terms  per  item  ordered  by  the 
participating countries. 

In  cases  where  the  negotiated  amounts  exceed  demand,  the  Commission,  at  the 
request  of  the  Member  States  concerned,  shall  elaborate  a  mechanism  for 
reallocation to national stockpiles or building up of the defence industrial readiness 
pool as referred to in Article 14(1), point (b). 

Article 37 

Facilitating off-take agreements 

The  Commission  shall  set  up  a  system  to  facilitate the  conclusion  of  off-take 
agreements  related  to  the  industrial  ramp-up  of  the  EDTIB’s  manufacturing 
capacities  as  well  as  those  of  the  Ukrainian  DTIB,  taking  into  account  the  opinion 
and  advice  of  the  Defence  Industrial  Readiness  Board  and  in  compliance  with 
competition and procurement rules. 

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2. 

The  system  referred  to  in  paragraph  1  shall  allow  interested  Member  States, 
associated countries and, where relevant, Ukraine to make bids indicating: 

(a) 

the volume and quality of defence products they intend to purchase; 

(b) 

the intended price or price range; 

(c) 

the intended duration of the off-take agreement. 

3. 

The system referred to in paragraph 1 shall allow manufacturers of defence products 
which comply with conditions laid out in Article 10 to make offers indicating: 

(a) 

the  volume  and  quality  of defence  products  for  which  they  are  seeking  to 
conclude off-take agreements; 

(b) 

the intended price or price range at which they are willing to sell; 

(c) 

the intended duration of the off-take agreement. 

Based on the bids and offers received pursuant to paragraph 2 and 3, the Commission 
shall  bring relevant  manufacturers  of  defence  products  in  contact  with  interested 
Member States and associated countries as well as, where relevant, Ukraine. 

On the basis of the contact referred to in paragraph 4, interested Member States and 
associated countries as well as, where relevant, Ukraine may request the Commission 
to  engage  in  a  joint  procurement  procedure  or  in  a  procurement  procedure  in  their 
name and/or on their behalf pursuant Article 35. 

The financial envelope referred to in Article 5(1) may cover the parts of the contract 
on non-recurrent costs and/or the reservation of manufacturing capacities. 

Article 38 

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,  transfer  of  inputs  within  the 
Union 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 such 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 concerned. 

Article 39 

Easing cross-certification process 

Member  States  shall  adopt  a  list  of  national  certification  authorities  for  defence 
purposes and notify it to the Commission, which shall make it available to Member 
States. 

The Commission shall, by the mean of implementing acts, draw and keep updated an 
official list of national certification authorities for defence purposes as identified by 

4. 

5. 

6. 

1. 

2. 

1. 

2. 

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Member  States.  Those  implementing  acts  shall  be  adopted  in  accordance  with  the 
examination procedure referred to in Article 58(3). 

3. 

A certification authority from one Member State may request from the certification 
authority  of  another  Member  State  basic  information  about  the  scope  of  the 
certification of a certain defence product.  

SECTION 2 

SUPPLY CHAIN SURVEILLANCE AND MONITORING 

Article 40 

Mapping of defence supply-chains 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

The Commission shall carry out a mapping of the Union’s defence supply-chains, in 
cooperation with the Defence Industrial Readiness Board.  

The  Defence  Industrial  Readiness  Board  shall  draw  up  a  list  of  defence  products 
which  are  critical  for  the  security  and  defence  interests  of  the  Union  and  of  its 
Member  States,  in  particular  the  reinforcement  of  Member  States’  defence 
capabilities and the readiness of the EDTIB (‘key defence products’). That list shall 
be updated on a regular basis, at least every year. 

The  Commission  shall,  after  consulting  the  Defence  Industrial  Readiness  Board, 
develop  a  framework  and  methodology  for  the  identification  of  crisis-relevant 
products,  with  an  emphasis  on  identifying  bottlenecks,  as  well  as  their  related 
manufacturing capacities in the Union. 

The mapping referred to in paragraph 1 and identification referred to in paragraph 6 
of this Article shall provide an analysis of the Union’s strengths and weaknesses as 
regards  the  supply  chains  of  crisis-relevant  products  and  shall  inform  the 
programming of the Programme established under Chapter II.  

To do so, the Commission shall use, inter alia, publicly and commercially available 
data  and  relevant  non-confidential  information  from  undertakings,  the  result  of 
similar analysis  performed, including  in  the context of Union law on raw materials 
and  renewable  energy,  as  well  as  the  evaluations  carried  out  pursuant  to  Article 
66(1).  Where  this  is  not  enough  to  identify  the  crisis-relevant  products,  the 
Commission may issue voluntary information requests to relevant actors involved in 
the  concerned  value  chains  and  based  in  the  Union,  after  consulting  the  Defence 
Industrial Readiness Board. 

The Commission shall, by means of implementing act, draw up and regularly update 
a  list  of  crisis-relevant  products.  Those  implementing  acts  shall  be  adopted  in 
accordance with the examination procedure referred to in Article 58(3). 

The  Commission  shall  inform  the  Defence  Industrial  Readiness  Board  of  the 
aggregate  results  of  the  activities  carried  out  pursuant  to  paragraph  4  on  a  regular 
basis.  

The  Commission  shall,  on  the  basis  of  the  outcome  of  the  activities  carried  out 
pursuant to paragraph 4 and after consulting the Defence Industrial Readiness Board, 
develop  a  list  of  early  warning  indicators.  The  Commission,  after  consulting  the 

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9. 

10. 

1. 

2. 

3. 

4. 

5. 

6. 

Defence Industrial Readiness Board, shall review the list of early warning indicators 
on a regular basis, at least every two years. 

Any information obtained pursuant to this Article shall be treated in compliance with 
the confidentiality obligations set out in Article 61. 

This Article shall be without prejudice to the protection of Member States’ essential 
security interests, as referred to in Article 346 TFEU (1) (a). 

Article 41 

Monitoring 

The Commission, in consultation with the Defence Industrial Readiness Board, shall 
carry  out  regular  monitoring  of  the  Union’s  manufacturing  capacities  necessary  for 
the  supply  of  crisis-relevant  products,  identified  in  accordance  with  Article  40, 
paragraph  (6)  with  a  view  to  identifying  factors  that  may  disrupt,  compromise  or 
negatively affect the supply of the key defence products they contribute to provide. 
The monitoring shall consist of the following activities: 

(a)  monitoring of early warning indicators identified pursuant to Article 40(8); 

(b)  monitoring  by  Member  States  of  the  integrity  of  activities  carried  out  by  the 
key market actors referred to in Article 42 and reporting by Member States on 
major events that may hinder the regular operations of such activities; 

(c) 

identifying  best  practices  for  preventive  risk  mitigation  and  increased 
transparency of the Union’s manufacturing capacities necessary for the supply 
of crisis-relevant products. 

The  Commission,  after  consulting  the  Defence  Industrial  Readiness  Board,  shall 
establish the frequency of the monitoring. 

The Commission  shall pay particular  attention to SMEs to  minimise administrative 
burden resulting from the information collection. 

The  Commission  may  invite,  after  consulting  the  Defence  Industrial  Readiness 
Board, key market actors referred to in Article 42, Member States, national defence 
industry  associations  and  other  relevant  stakeholders  to  provide  information,  on  a 
voluntary basis, for the  purpose of carrying  out  monitoring activities in accordance 
with paragraph 1, first subparagraph, point (a).  

For  the  purposes  of  paragraph  1,  first  subparagraph,  point  (b),  Member  States  may 
request  information,  on  a  voluntary  basis,  from  key  market  actors  referred  to  in 
Article 42 where necessary and proportionate.  

For  the  purposes  of  paragraph  3,  national  competent  authorities  shall  establish  and 
maintain  a  list  of  contacts  of  all  relevant  undertakings  contributing  effectively  or 
potentially to the supply of the key defence products, which are established in their 
territory.  That  list  shall  be  transmitted  to  the  Commission.  The  Commission  shall 
provide  for  a  standardised  format  for  the  list  of  contacts  with  a  view  to  ensuring 
interoperability. 

Without  prejudice  to  their  essential  security  interests  and  the  protection  of 
commercially  confidential  information  resulting  from  agreements  entered  into  by 
Member  States,  Member  States  shall,  where  appropriate,  provide  the  Defence 
Industrial Readiness Board with any additional relevant information, in particular on 

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7. 

the  potential  or  future  adoption  at  national  level  measures  for  the  procurement, 
purchase or manufacturing of crisis-relevant products. 

On  the  basis  of  the  information  collected  through  the  activities  under  paragraph  1, 
the  Commission  shall  provide  a  report  of  the  aggregated  findings  to  the  Defence 
Industrial  Readiness  Board  in  the  form  of  regular  updates.  The  Defence  Industrial 
Readiness Board shall meet to assess the results of the monitoring. Where relevant, 
the  chair  of  the  Defence  Industrial  Readiness  Board  may  invite  national  defence 
industrial  associations,  key  market  actors,  and  experts  from  academia  and  civil 
society to such meetings. 

8. 

This Article shall be without prejudice to the protection of Member States’ essential 
security interests as referred to in Article 346 TFEU (1) (a). 

Article 42 

Key market actors 

1. 

Member States shall, in cooperation with the Commission, identify key market actors 
involved in  the supply of key defence products  established in  their territory, taking 
into account the following elements: 

(a) 

(b) 

the Union or global market share of the key market actor in the market for that 
product; 

the importance of a market actor in maintaining a sufficient level of supply of a 
product  in  the  Union,  taking  into  account  the  availability  in  the  Union  of 
alternative means for the provision of that product; 

(c) 

the  impact  that  a  disruption  of  supply  of  the  product  provided  by  the  market 
actor could have on the supply of crisis-relevant products. 

2. 

Member States shall report on major events that may hinder the regular operations of 
the activities as referred to in paragraph 1. 

SECTION 3 

SUPPLY CRISIS - PREVENTION AND MITIGATION 

Article 43 

Alerts and preventive action 

1. 

2. 

Where a national competent authority becomes aware of a risk of serious disruption 
of  a  crisis-relevant  products  or  has  concrete  and  reliable  information  of  any  other 
relevant  risk  factor  or  event  materializing  affecting  the  supply  of  a  crisis  relevant 
product, it shall alert the Defence Industrial Readiness Board without undue delay. 

Where the Defence Industrial Readiness Board or the Commission become aware of 
a risk of serious disruption of a crisis  relevant  product  or has concrete and reliable 
information  of  any  other  relevant  risk  factor  or  event  materializing  affecting  the 
supply of a crisis relevant product, including on the basis of early warning indicators, 
upon an alert pursuant to paragraph 1 or from international partners, the Commission 
shall, without undue delay, carry out the following preventive actions: 

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(a) 

convene an extraordinary meeting of the Defence Industrial Readiness Board to 
coordinate the following actions: 

(1)  discuss the severity of the disruptions to the availability and supply of the 

concerned crisis-relevant products; 

(2) 

recommend  to  the  Commission  to  initiate  action  in  accordance  with 
Chapter II of this Regulation;  

(3)  discuss  approaches  of  the  national  competent  authorities,  including  to 

assess the state of preparedness of the key market actors; 

(4) 

enter  into  dialogue  with  stakeholders  of  the  Union’s  manufacturing 
capacities necessary for the supply of crisis-relevant products with a view 
to identifying, preparing and possibly coordinating preventive measures; 

(5)  discuss  the  activation  of  the  supply  crisis  state  referred  to  in  Article  44 

where necessary and proportionate. 

(b)  on  behalf  of  the  Union,  enter  into  consultations  or  cooperation  with  relevant 
third  countries  and  international  organisations  with  a  view  to  seeking 
cooperative solutions  to  address  supply-chain  disruptions,  in  compliance  with 
international  obligations,  which  may  involve,  where  appropriate,  carrying  out 
coordination in relevant international fora. 

Article 44 

1. 

A supply crisis shall be considered to occur where: 

Activation of the supply crisis state 

(a) 

(b) 

there are serious disruptions in the provision of products, which are not defence 
products,  or  serious  obstacles  to  trade  in  such  products  within  the  Union 
causing their significant shortage; and 

such significant shortages prevent the supply, repair or maintenance of defence 
products  to  the  extent  that  it  would  have  serious  detrimental  effect  on  the 
functioning  of  the  Union’s  defence  supply  chains  impacting  the  society, 
economy and security of the Union. 

Where the Commission or the Defence Industrial Readiness Board become aware of 
a potential supply crisis pursuant to Article 43, the Commission shall assess whether 
the  conditions  set  out  in  paragraph  1  of  this  Article  are  met.  That  assessment  shall 
take into account the potential positive and negative impacts and consequences of the 
supply  crisis  state  on  the  Union’s  defence  supply  chains  as  well  as  assessments 
performed  in  other  relevant  Union  crisis  management  frameworks.  Where  that 
assessment  provides  concrete  and  reliable  evidence,  the  Commission  may,  after 
consulting  the  Defence  Industrial  Readiness  Board,  propose  to  the  Council  to 
activate the supply crisis state. 

The  Council,  acting  by  qualified  majority,  may  activate  the  supply  crisis  state  by 
means of a Council implementing act. The duration of the supply crisis state shall be 
specified in the Implementing Act and shall not exceed 12 months. 

The Commission shall report on a regular basis and at least every three months to the 
Council and to the European Parliament on the state of the crisis. 

2. 

3. 

4. 

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5. 

6. 

7. 

8. 

9. 

10. 

11. 

12. 

1. 

2. 

Before  the  expiry  of  the  duration  of  the  supply  crisis,  the  Commission  shall  assess 
whether  it  is  appropriate  to  prolong  the  supply  crisis  state.  Where  such  assessment 
provides  concrete and reliable evidence that the conditions  for the activation of the 
supply  crisis  state  are  still  met,  the  Commission  may,  after  consulting  the  Defence 
Industrial Readiness Board, propose to the Council to prolong the supply crisis state. 

The  Council,  acting  by  qualified  majority,  may  prolong  the  supply  crisis  state  by 
means  of  a  Council  implementing  act.  The  duration  of  the  prolongation  shall  be 
limited and specified in the Council implementing act. 

The  Commission  may  propose  prolonging  the  supply  crisis  state  once  or  more 
frequently where duly justified. 

During  the  supply  crisis  state,  the  Commission  shall,  after  consulting  the  Defence 
Industrial Readiness Board, assess the appropriateness of an early termination of the 
crisis  state.  If  the  assessment  indicates  so,  the  Commission  may  propose  to  the 
Council to terminate the crisis state. 

The  Council  may  terminate  the  supply  crisis  state  by  means  of  a  Council 
implementing act. 

During the crisis state, the Commission shall, upon request from a Member State or 
on  their  own  initiative,  convene  extraordinary  meetings  of  the  Defence  Industrial 
Readiness  Board  where  necessary.  Member  States  shall  work  closely  with  the 
Commission, inform in a timely manner about and coordinate any national measures 
taken  with  regard  to  the  concerned  defence  supply  chain  within  the  Defence 
Industrial Readiness Board. 

Upon expiry of the period for which the supply crisis state is activated or in the event 
of its early termination pursuant to paragraph 8 of this Article, the measures taken in 
accordance with Articles 46 and 47 shall cease to apply immediately. 

The  Commission  shall  update  the  mapping  and  the  monitoring  of  the  Union’s 
defence  supply  chains  pursuant  to  Articles  40  and  41  taking  into  account  the 
experience  from  the  crisis  no  later  than  six  months  after  the  expiry  of  the  supply 
crisis state. 

Article 45 

Supply-crisis emergency toolbox 

Where the supply crisis state is activated pursuant to Article 44 and where necessary 
in  order  to  address  the  supply  crisis  in  the  Union,  the  Commission  may  take  the 
measures provided for in Article 45 and 46, under the conditions laid down therein.  

The  Commission  shall,  after  consulting  the  Defence  Industrial  Readiness  Board, 
restrict  the  application  of  the  measures  provided  for  in  Articles  46  and  47  to  the 
crisis-relevant  products  disturbed  or  under  threat  of  disturbance  on  account  of  the 
supply crisis. The use of the measures referred to in paragraph 1 of this Article shall 
be proportionate and restricted to what is necessary for addressing serious disruptions 
affecting the supply chains of the crisis-relevant products in the Union and must be 
in  the  best  interest  of  the  Union.  The  use  of  those  measures  shall  avoid  placing 
disproportionate administrative burden in particular on SMEs. 

3. 

Where  the  supply  crisis  state  is  activated  pursuant  to  Article  44  and  where 
appropriate in order to address the supply crisis in the Union, the Defence Industrial 

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4. 

5. 

1. 

2. 

3. 

4. 

5. 

6. 

Readiness  Board  may  assess  and  advise  on  appropriate  and  effective  emergency 
measures. 

The Commission shall regularly inform the European Parliament and the Council of 
any  measures  taken  in  accordance  with  paragraph  1  and  explain  the  reasons  for  its 
action. 

The Commission may, after consulting the Defence Industrial Readiness Board, issue 
guidance on the implementation and the use of the emergency measures. 

Article 46 

Information gathering 

Where  the  supply  crisis  state  is  activated  pursuant  to  Article  44,  the  Commission 
may  request  the  relevant  undertakings  contributing  to  the  production  of  crisis-
relevant  products,  which  are  not  defence  products,  with  the  prior  agreement  of  the 
Member  State  in  which  it  is  established,  to  provide  information  about  their 
production capabilities, production capacities and current primary disruptions within 
a set  time limit.  The requested information shall  be limited to  what  is  necessary to 
assess the nature of the supply crisis or to identify and assess potential mitigation or 
emergency  measures  at  Union  or  national  level.  The  information  requests  shall  not 
entail  the  supply  of  information  the  disclosure  of  which  would  be  contrary  to  the 
Member States’ essential security interests. 

Before  launching  a  request  for  information,  the  Commission  may  carry  out  a 
voluntary  consultation  of  a  representative  number  of  relevant  undertakings  with  a 
view to identifying the appropriate and proportionate content of such a request. The 
Commission  shall  prepare  the  request  for  information  in  cooperation  with  the 
Defence Industrial Readiness Board. 

The  Commission  shall  use  secure  means  to  launch  the  request  for  information  and 
handle  any  acquired  information  in  accordance  with  Article  61.  For  this  purpose, 
national  competent  authorities shall transmit  to  the Commission  the list  of contacts 
established under Article 41(5). 

The  Commission  shall  without  undue  delay  forward  a  copy  of  the  request  for 
information  to  the  national  competent  authority  of  the  Member  State  in  whose 
territory the production site of the addressed undertaking is situated. If the national 
competent  authority  so  requires,  the  Commission  shall  transmit  the  information 
acquired from the relevant undertaking in accordance with Union law. 

The  request  for  information  shall  state  its  legal  basis,  be  limited  to  the  minimum 
necessary and be proportionate in terms of the granularity and volume of the data and 
frequency of access to the data requested, have regard for the legitimate aims of the 
undertaking and the cost and effort required to make the data available, and set out 
the time limit within which the information is to be provided. It shall also state the 
penalties provided for in Article 55. 

The  owners  of  the  undertakings  or  their  representatives  and,  in  the  case  of  legal 
persons  or  associations  having  no  legal  personality,  the  persons  authorised  to 
represent them by law or by their constitution shall supply the information requested 
on behalf of the undertaking or the association of undertakings concerned. 

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7. 

8. 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

If  an  undertaking  established  in  the  Union  is  subject  to  a  request  for  information 
from  a  third  country,  related  to  its  activities  for  a  Union’s  critical  defence  supply 
chain, it shall inform the Commission, in due time, in such a manner as to enable the 
Commission  to  request  similar  information  from  the  undertaking.  The  Commission 
shall inform the Defence Industrial Readiness Board of the existence of such request 
from a third country. 

If  an  undertaking  supplies  incorrect,  incomplete  or  misleading  information  in 
response  to  a  request  made  pursuant  to  this  Article,  or  does  not  supply  the 
information  within  the  prescribed  time  limit,  it  shall  be  subject  to  fines  set  in 
accordance with Article 55, except where the undertaking has sufficient reasons for 
not supplying the requested information. 

Article 47 

Priority-rated orders 

Where the crisis state is activated pursuant to Article 44, a Member State which faces 
or may face severe difficulties either in the placing of an order or in the execution of 
a contract for the supply of key defence products due to shortages or serious risks of 
shortages  along  a  Union’s  critical  defence  supply  chain,  may  request  the 
Commission  to  require  an  undertaking  to  accept,  or  to  prioritise  an  order  of  crisis-
relevant products, which are not defence products (‘priority rated order’). 

Upon a request referred to in paragraph 1, the Commission may, after consulting the 
Member State of establishment of the undertaking concerned and with its agreement, 
notify the undertaking concerned of its intent to impose a priority rated order. 

The notification referred to in paragraph 2 shall include information about the legal 
basis for the request, specify the product, specifications and quantities concerned as 
well  as  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  referred  to  in  paragraph  2,  the  undertaking  shall  reply  to  the 
Commission,  within  five  working  days  and  state  whether  it  can  accept  or  not  the 
order. 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  priority  rated  order,  it  shall  provide  the 
Commission with a detailed justification hereor. 

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

Where  the  notified  undertaking  declines  the  priority  rated  order,  the  order  shall  be 
deemed refused. Having due regard to the justifications invoked by the undertaking, 
the Commission may: 

(a) 

abstain from pursuing the order; 

(b)  oblige, by way of implementing acts, the concerned undertakings to accept or 

perform the priority rated order at a fair and reasonable price. 

8. 

The  Commission  shall  take  into  account  the  objections  raised  by  the  undertaking 
under  paragraph  7  and  state  the  reasons  why,  in  line  with  the  proportionality 

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9. 

10. 

11. 

12. 

13. 

14. 

15. 

16. 

17. 

principle  and  the  fundamental  rights  of  the  undertaking  under  the  Charter  of 
Fundamental  rights  of  the  Union,  it  was  necessary  to  adopt  the  implementing  act 
referred  to  in  paragraph  7,  point  (b),  in  light  of  the  circumstances  described  in 
paragraph 1. 

The Commission shall state in the implementing act referred to in paragraph 7, point 
(b),  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 with. The Commission shall also state the penalties 
provided for in Article 55 for non-compliance with the obligation. 

Where the undertaking has accepted the priority rated order of the Commission under 
paragraph  6  or  where  the  Commission  has  adopted  an  implementing act under 
paragraph 7(b), the priority rated order shall: 

(a) 

be  placed  at  a  fair  and  reasonable  price,  adequately  taking  into  account  the 
economic operator’s opportunity costs when fulfilling the priority rated orders 
vis-à-vis existing contractual obligations; 

(b) 

take  precedence  over  any  performance  obligation  under  private  or  public  law 
with the exception of these directly related to military orders.  

Any  conflict  between  a  priority  rated  order  and  a  measure  under  any  other 
prioritisation  mechanism  of  the  Union  shall  be  resolved  by  the  Commission,  based 
on the weighing of the public interest. 

Where the undertaking has agreed to the order of the Commission under paragraph 6 
or where the Commission has adopted an implementing act under paragraph 7(b), 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) 

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) 

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 of establishment, amend its 
implementing Act to release, partially or in totality the undertaking concerned from 
its obligations under this Article. 

This  Article  shall  be  without  prejudice  to  the  use  of  national  mechanisms  or 
initiatives having an equivalent effect.  

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  6  or  7(b)  it  shall  be  shielded  from  any 
contractual or extra-contractual liability in relation to comply with the priority rated 
requests. The liability shall be excluded only to the extent the violation of contractual 
obligations was necessary for compliance with the mandated prioritisation. 

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18. 

19. 

20. 

Where  an  economic  operator,  after  having  expressly  accepted  or  been  obliged  to 
accept to prioritise the orders requested by the Commission, intentionally or through 
gross  negligence,  does  not  comply  with  the  obligation  to  prioritise  those  orders,  it 
shall  be  subject  to  fines  set  in  accordance  with  Article  54,  except  where  the 
undertaking has sufficient reasons for not complying with the obligation to prioritise 
those orders. 

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

The implementing acts referred to in this Article  shall be adopted in accordance with 
the examination procedure referred to in Article 58 (3). 

SECTION 4 

SECURITY-RELATED SUPPLY CRISIS STATE 

Article 48 

Activation of the security-related supply crisis state 

1. 

A security-related supply crisis shall be considered to occur where: 

(a)  A security crisis has arisen or is deemed to have arisen; 

(b) 

there are serious disruptions in the provision of products or serious obstacles to 
trade  in  defence  products  within  the  Union  causing  significant  shortages  of 
defence  products  or  related  intermediate  products  or  raw  or  processed 
materials. 

Where  a  security-related  supply  crisis  occurs  or  where  the  Commission  or  the 
Defence  Industrial  Readiness  Board  becomes  aware  of  a  potential  security-related 
supply crisis pursuant to Article 43, the Commission shall assess, with the support of 
the  High-Representative,  whether  the  conditions  of  paragraph  1  of  this  Article  are 
met.  That  assessment  shall  take  into  account  the  potential  positive  and  negative 
impacts  and consequences of the  security-related  supply crisis  state on the Union’s 
defence  supply  chains.  Where  that  assessment  provides  concrete  and  reliable 
evidence, the Commission may propose to the Council to activate the security-related 
supply crisis state. 

The Council, upon the proposal of the Commission and acting by qualified majority, 
may  adopt  an  Implementing  Act  activating  the  security-related  supply  crisis  state 
where that is appropriate to address the crisis, taking into account the need to ensure 
a high level of security of the Union, Member States and Union citizens. 

The  Council  shall  set  out  in  the  Implementing  Act  activating  the  security-related 
supply crisis state which of the measures set out in Articles 49 to 54 are appropriate 
to  the  crisis,  taking  into  account  the  need  to  ensure  a  high  level  of  security  of  the 
Union,  Member  States  and  Union  citizens,  and  which  measures  are  therefore  to  be 
activated. 

The  security-related  supply  crisis  state  shall  be  activated  for  a  maximum  period  of 
twelve months. No later than three weeks before the expiry of the period for which 
the  security-related  supply  crisis  state  was  activated,  the  Commission  with  the 
support  of  the  High-Representative  shall  submit  to  the  Council  a  report,  assessing 

2. 

3. 

4. 

5. 

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whether  that  period  should  be  prolonged.  The  report  shall  in  particular  analyse  the 
security situation and the economic consequences of the security crisis in the Union 
as a whole and in Member States, as well as the impact of the measures previously 
activated under this Regulation. 

The Commission may propose prolongation to the Council, specifying which of the 
measures  are  appropriate  for  prolongation,  when  the  assessment  referred  to  in 
paragraph  4  concludes  that  it  is  appropriate  that  the  period  for  which  the  security-
related supply crisis state is activated be prolonged. The prolongation shall be for up 
to  six  months. The Council, acting by qualified  majority, may repeatedly decide to 
prolong  the  period  for  which  the  security-related  supply  crisis  state  is  activated 
where that is appropriate to address the crisis, taking into account the need to ensure 
a high level of security of the Union, Member States and European citizens. 

The  Commission,  after  consulting  the  Defence  Industrial  Readiness  Board,  may 
propose to the Council to adopt an implementing act activating additional measures 
or  deactivating  any  activated  measures  set  out  in  Articles  49  to  54,  in  addition  to 
those measures that it had already activated, where that is appropriate to address the 
crisis,  taking into account  the need to  ensure  a  high  level  of security of the Union, 
Member States and Union citizens. 

Upon  expiry  of  the  period  for  which  the  security-related  supply  crisis  state  is 
activated,  the  measures  taken  in  accordance  with  Articles  49  to  54  shall  cease  to 
apply. 

6. 

7. 

8. 

In the course of the preparation and implementation of the measures set out in Articles 49 to 
54,  the  Commission  shall,  whenever  possible,  act  in  close  coordination  with  the  Defence 
Industrial Readiness Board, which shall provide advice in a timely manner. The Commission 
shall inform the Defence Industrial Readiness Board on the action taken. 

9. 

Where the security-related supply crisis state is activated, the Commission may take 
the  measure  provided  for  in  Articles  46  and  47,  under  the  conditions  laid  down 
therein and in Article 45. 

Article 49 

Information gathering 

Where the Council activates this measure in accordance with Article 48(4), the Commission 
may take the measure provided for in Article 46 in relation to defence products, in accordance 
with the conditions defined therein. 

Article 50 

Prioritisation of defence products (Priority Rated Requests) 

1. 

Where  the  Council  activates  this  measure  in  accordance  with  Article  48(4),  a 
Member State, which faces or may face severe difficulties either in the placing of an 
order  or  in  the  execution  of  a  contract for  the  supply  of  defence  products  due  to 
shortages  or  serious  risks  of  shortages  of  crisis-relevant  products  and  these 
difficulties may undermine the security of the Union and of its Member States, may 
ask the Commission to require an undertaking to accept, or to prioritise certain orders 

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2. 

3. 

4. 

5. 

6. 

7. 

8. 

of  crisis-relevant  products  (‘priority  rated  requests’).  These  requests  may  only 
concern defence products. 

Upon  a  request  referred  to  in  paragraph  1,  the  Commission  may,  after  the 
consultation of the Member State of establishment of the concerned undertaking and 
with its prior agreement, require the latter to  accept the priority rated requests. The 
Commission’s  request  shall  explicitly  indicate  that  the  economic  operator  remains 
free to refuse the request. 

Where the undertaking to which the request referred to in paragraph 1 is addressed 
has  expressly  accepted  the  request  to  prioritise  the  requests,  the  Commission  shall, 
after  the  consultation  of  the  Member  State  of  establishment  of  the  concerned 
undertaking and with its prior agreement, adopt an implementing act providing for: 

(a) 

(b) 

the legal basis of the priority rated requests which has to be complied with by 
the undertaking; 

the crisis-relevant products subject to the priority rated request and quantity in 
which they are to be supplied; 

(c) 

the time limits within which the priority rated request is to be completed; 

(d) 

the beneficiaries of the priority rated request, and 

(e) 

the waiver of contractual liability under the conditions laid down in paragraph 
5. 

The priority rated requests shall be  placed at a fair and reasonable price adequately 
taking  into  account  the  economic  operator’s  opportunity  costs  when  fulfilling  the 
priority  rated  requests  vis-à-vis  existing  contractual  obligations.  The  priority  rated 
requests shall take precedence over any prior private or public contractual obligation 
related  to  the  products  subject  to  the  priority  rated  request  under  private  or  public 
law. 

The  economic  operator  subject  to  that  priority-rated  request  shall  not  be  liable  for 
any breach of contractual obligation that is governed by the law of a Member State, 
where: 

(a) 

the breach of contractual obligations is strictly necessary for compliance with 
the required prioritization, 

(b) 

the implementing act referred to in paragraph 3 has been complied with and 

(c) 

the acceptance of the priority rated request was not solely made with a view to 
unduly avoiding a prior performance obligation. 

Where an economic operator, after having expressly accepted to prioritise the orders 
requested  by  the  Commission,  intentionally  or  through  gross  negligence,  does  not 
comply with the obligation to prioritise those orders, it shall be subject to fines set in 
accordance with Article 55, except where the undertaking has sufficient reasons for 
not complying with the obligation to prioritise those orders.  

This  Article  shall  be  without  prejudice  to  the  use  of  national  mechanisms  or 
initiatives having an equivalent effect. 

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

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9. 

The implementing act referred to in paragraph 3 shall be adopted in accordance with 
the examination procedure referred to in Article 58(3). 

Article 51 

1. 

2. 

3. 

Intra-EU transfers of defence products 

Where  the  Council  activates  this  measure  in  accordance  with  Article  48(4)  and 
without  prejudice  to  Directive  2009/43/EC  and  Member  States’  prerogatives  under 
that  Directive,  Member  States  shall  ensure  that applications  related  to  intra-EU 
transfers  are  processed  in  an  efficient  and  timely  manner.  To  that  end,  all  national 
authorities  concerned  shall  ensure  that  the  treatment  of  an  application  does  not 
exceed 2 working days.  

Transfers  of  crisis-relevant  products  cannot  be  considered  as  sensitive  within  the 
meaning of article 4, paragraph 8 of Directive 2009/43/EC. 

Member  States  shall  refrain  from  imposing  restrictions  to  the  transfer  of  defence-
related  products  as  defined  in  Article  2  of  Directive  2009/43/EC  within the  Union. 
Where Member States impose such restrictions on grounds of security or defence, it 
shall be done only if those restrictions are: 

(a) 

transparent, i.e. enshrined in public statements/documents; 

(b)  duly motivated, i.e. they need to spell out the reasons and the link to security or 

defence; 

(c) 

(d) 

proportionate, i.e. not going beyond what is strictly necessary; 

relevant and specific, i.e. a restriction needs to be specific to a defence-related 
product or a category of defence-related products; 

(e) 

non-discriminatory. 

Article 52 

Support to emergency defence innovation actions 

Where the Council activates this measure in accordance with Article 48(4), innovation actions 
related  to  one  of  the  following  activities  shall  be  deemed  eligible  under  the  Programme, 
provided for in Chapter II: 

(a) 

(b) 

(c) 

(d) 

activities  that  aim  at  rapid  adaptation  and  modification  of  civilian  products  for 
defence applications; 

activities that aim at very significantly shortening the delivery lead time of defence 
products; 

activities that aim at significantly simplifying the technical specifications of defence 
products in order to enable their mass production; 

activities  that  aim  at  significantly  simplifying  the  production  process  of  defence 
products to enable their mass production. 

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1. 

2. 

3. 

4. 

5. 

1. 

2. 

Article 53 

Certification in security-related supply crisis state 

Where the Council activates this measure in accordance with Article 48(4), Member 
States  shall  ensure  that  administrative  procedures  related  to  the  certification  and 
where necessary technical adaptations are processed in the most rapid possible way, 
according to their applicable national laws and regulations. 

Where  such  status  exists  in  national  law,  certification  of  crisis-relevant  defence 
products shall be allocated the status of the highest national significance possible. 

Where this measure is activated, defence products certified in a Member State shall 
be  deemed  certified  in  another  Member  State  without  being  subject  to  additional 
controls. 

The  Implementing  Act  of the Council  referred to article 48(3) may  lay down more 
precise provisions on the scope of this measure. 

This  measure  shall  be  without  prejudice  to  Member  States’  essential  security 
interests. 

Article 54 

National fast-tracking of permit granting procedures 

Where the Council activates this measure in accordance with Article 48(4)and where 
such  status  exists  in  national  law  the  planning,  construction  and  operation  of 
production  facilities  of  crisis-relevant  products  shall  be  allocated  the  status  of  the 
highest  national  significance  possible  and  be  treated  as  such  in  permit  granting 
processes, including those relating to environmental assessments and if national law 
so provides, in spatial planning. 

The security of supply of defence products may be considered an imperative reason 
of overriding public interest within the meaning of Article 6(4) and Article 16(1)(c) 
of  Directive  92/43/EEC  and  of  overriding  public  interest  within  the  meaning  of 
Article  4(7)  of  Directive  2000/60.  Therefore,  the  planning,  construction  and 
operation  of  related  production  facilities  may  be  considered  of  overriding  public 
interest, provided that the remaining other conditions set out in these provisions are 
fulfilled. 

SECTION 5 

PENALTIES 

Article 55 

Penalties 

1. 

The Commission may,  by  way of implementing act, impose on the  undertakings or 
associations,  including  their  owners  or  representatives,  being  the  addressees  of 
information  gathering  measures  referred  to  in  Articles  46,  and  48,  or  of  any  of  the 

EN 

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obligations  to  inform  the  Commission  of  a  third-country  obligation  pursuant  to 
Articles  47(16)  and  50(8)  or  to  prioritise  the  production  of  crisis-relevant  products 
pursuant to Articles 47 or 49, where it deems it to be necessary and proportionate: 

(a) 

(b) 

(c) 

fines  not  exceeding  EUR 300 000,  where  it,  intentionally  or  through  gross 
negligence,  supplies  incorrect,  incomplete  or  misleading  information  in 
response to a request made pursuant to Article 46 and 48, or does not supply 
the information within the prescribed time limit; 

fines  not  exceeding  EUR 150 000,  where  it,  intentionally  or  through  gross 
negligence, does not comply with the obligation to inform the Commission of a 
third-country obligation pursuant to Article 47(16) and 50(8); 

periodic penalty payments not exceeding 1,5 % of the average daily turnover in 
the preceding business year for each working day of non-compliance from the 
date  established  in  the  decision  in  which  the  priority-rated  order  was  issued, 
where  it,  intentionally  or  through  gross  negligence,  does  not  comply  with  an 
obligation  to  prioritise  the  production  of  crisis-relevant  products  pursuant  to 
Article 47. Where the undertaking concerned is an SME, the periodic penalty 
payments imposed shall not exceed 0,5 % of its average daily turnover in the 
preceding business year; 

(d) 

fines  not  exceeding  EUR 300 000,  where  it,  intentionally  or  through  gross 
negligence, does not comply with the obligation to prioritise the production of 
crisis-relevant products pursuant to Article 49. 

Before  taking  a  decision  pursuant  to  paragraph  1  of  this  Article,  the  Commission 
shall  provide  an  opportunity  for  the  concerned  undertakings  and  associations, 
including their owners or representatives, to be heard in accordance with Article 56. 
It  shall  take  into  account  any  duly  reasoned  justification  presented  by  them  for  the 
purpose  of  determining  whether  fines  or  periodic  penalty  payments  are  deemed 
necessary and proportionate. 

Implementing acts referred to in this Article shall be adopted in accordance with the 
examination procedure referred to in Article 58(3). 

In fixing the amount of the fine or periodic penalty payment, the Commission shall 
take into consideration the nature, gravity and duration of the infringement, including 
in  cases  of  non-compliance  with  the  obligation  to  accept  and  prioritise  a  priority-
rated order set out in Article 47, whether the undertakings or associations, including 
their owners or representatives referred to in paragraph (1), have partially complied 
with the priority-rated order. 

The  fines  shall  constitute  external  assigned  revenue  within  the  meaning  of  Article 
21(5)  of  the  Financial  Regulation  to  the  Programme  and  of  the  Ukraine  Support 
Instrument.  

Article 56 

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

Before adopting a decision pursuant to Article 55, the Commission shall ensure that 
the  concerned  undertakings  and  associations, 
their  owners  or 
representatives, have been given the opportunity to submit observations on:  

including 

2. 

3. 

4. 

5. 

1. 

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2. 

3. 

4. 

1. 

2. 

3. 

4. 

(a) 

(b) 

the preliminary findings of the Commission, including any matter to which the 
Commission has taken objections;  

the  measures  that  the  Commission  may  intend  to  take  in  view  of  the 
preliminary findings pursuant to point (a) of this paragraph. 

their  owners  or 
The  concerned  undertakings  and  associations, 
representatives  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. 

including 

The Commission shall base its imposition of fines or periodic penalty payments only 
on objections on which the concerned undertakings and associations, including their 
owners or representatives, have been able to comment. 

Where  the  Commission  has  informed  the  concerned  undertakings  and  associations, 
including their owners or representatives, of its preliminary findings as referred to in 
paragraph (1), it shall give access, if so requested, 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,  or  in  order  to  preserve  business  secrets  or 
other confidential information of any person. 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. 

Chapter V 

Governance, evaluation and control 

Article 57 

Defence Industrial Readiness Board 

The Defence Industrial Readiness Board is hereby established.  

The general task of the Board is to assist and provide advice and recommendations to 
the Commission pursuant to this Regulation, in particular pursuant to its Chapter IV 
[Security of Supply]. 

To  assist  the  Commission  in  the  implementation  of  the  measures  referred  to  in 
Chapter  II,  the  Defence  Industrial  Readiness  Board  shall  assist  the  latter  in  the 
identification  of  funding  priority  areas,  taking  into  account  the  defence  capability 
priorities commonly agreed by Member States within the framework of the Common 
Foreign  and  Security  Policy  (CFSP),  in  particular  in  the  context  of  the  Capability 
Development Plan. 

The  Commission  shall  maintain  a  regular  flow  of  information  to  the  Defence 
Industrial  Readiness  Board  on  any  planned  measures  or  measures  that  have  been 
taken  related  to  the  activation  of  the  supply  crisis  or  security-related  supply  crisis 
state. The Commission shall provide the necessary information through a secured IT 
system. 

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5. 

For the purposes  of the  supply-crisis  state  as  referred to  in  Article  44, the Defence 
Industrial Readiness Board shall assist the Commission in the following tasks: 

(a) 

(b) 

(c) 

analysing  crisis-relevant  information  gathered  by  Member  States  or  the 
Commission; 

assessing whether the criteria for activation or deactivation of the supply-crisis 
state have been fulfilled; 

providing guidance on the implementation of the measures chosen to  respond 
to supply crisis at Union level; 

(d)  performing a review of national crisis measures; 

(e) 

facilitating exchanges  and sharing of information, including  with  other crisis-
relevant bodies at Union level, as well as, as appropriate, third countries, with 
particular  attention  paid 
international 
organisations. 

to  developing  countries,  and 

6. 

For the purposes of the security-related supply-crisis state as referred to in Article 48, 
the Defence Industrial Readiness Board shall: 

(a) 

(b) 

facilitate coordinated action by the Commission and the Member States;  

adopt  opinions  and  guidance,  including  specific  response  measures,  for  the 
Member States for ensuring the timely availability and supply of crisis-relevant 
products; 

(c) 

assist  and  provide  guidance  on  the  activation  of  measures  as  referred  to  in 
Articles 49 to 54; 

(d)  provide  a  forum  for  the  coordination  of  actions  of  the  Council,  the 

Commission, and other relevant Union bodies. 

The Defence Industrial Readiness Board shall be composed of the representatives of 
the  Commission,  the  High-Representative  and  Head  of  the  European  Defence 
Agency, Member States and associated countries. Each Member State or associated 
country  shall  nominate  one  representative  and  one  alternate  representative.  The 
Board shall be chaired by the Commission for the purposes of the tasks laid down in 
this  Regulation.  The  secretariat  of  the  Defence  Industrial  Readiness  Board  shall  be 
ensured by the Commission.  

The Defence Industrial Readiness Board shall meet whenever the situation requires, 
upon  request  from  the  Commission  or  a  Member  State  or  an  associated  country.  It 
shall  adopt  its  rules  of  procedure  on  the  basis  of  a  proposal  submitted  by  the 
Commission.  

The Defence Industrial Readiness Board may issue opinions, upon the request of the 
Commission or on its own initiative. The Defence  Industrial  Readiness Board shall 
endeavour to find solutions which command the widest possible support.  

The  Defence  Industrial  Readiness  Board  shall  invite,  at  least  once  a  year, 
representatives from National Defence Industrial Associations and selected industrial 
representatives, taking into account the necessity to ensure a balanced geographical 
representation  (structured  dialogue  with  defence  industry).  Where  the  supply  crisis 
state referred to in Article 44 or the security supply crisis state referred to in Article 
48 has been activated, the Defence Industrial Readiness Board shall invite high-level 

7. 

8. 

9. 

10. 

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11. 

12. 

13. 

14. 

industrial  representatives to  meet  in  special configuration in  order to  discuss  issues 
linked to crisis-relevant products. 

The  Defence  Industrial  Readiness  Board  shall  invite  the  representatives  of  other 
crisis-relevant  bodies  at  Union  level  as  observers  to  the  relevant  meetings  of  the 
Board. 

The  Defence  Industrial  Readiness  Board  shall  invite,  where  relevant  and  notably 
with  a  view  to  actions  reinforcing  the  Ukrainian  DTIB,  in  line  with  its  rules  of 
procedure and with due respect to the security and defence interests of the Union and 
its Member States, a representative from Ukraine to attend meetings as an observer. 

The Commission shall ensure transparency and provide members of the Board with 
equal  access  to  information,  in  order  to  ensure  that  the  decision-making  process 
reflects the situation and the needs of all Member States. 

The  Commission  may,  on  its  own  initiative  or  on  the  proposal  of  the  Defence 
Industrial Readiness Board, set up working groups on an ad hoc basis to support the 
Defence Industrial Readiness Board in its work for the purpose of examining specific 
questions  on  the  basis  of  the  tasks  referred  to  in  paragraph  1.  Member  States  shall 
nominate experts for the working groups.  

15. 

The Commission shall set up a working group on legal, regulatory and administrative 
hurdles. The objectives of this working group are: 

(a) 

to identify existing or potential legal, regulatory and administrative obstacles at 
international, EU and national levels to the achievement of the objectives listed 
in Article 4; 

(b) 

to  identify  potential  solutions  and/or  mitigation  measures  to  identified 
obstacles. 

Article 58 

Committee Procedure 

1. 

2. 

3. 

4. 

1. 

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

The EDA shall be invited to provide its views and expertise to the committee as an 
observer. The EEAS shall also be invited to assist in the work of the committee. 

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

Where the committee delivers no opinion, the Commission shall not adopt the draft 
implementing  act  and  Article  5(4),  third  subparagraph,  of  Regulation  (EU)  No 
182/2011 shall apply. 

Article 59 

EU – UA Framework agreement 

The  Commission  shall  conclude  a  framework  agreement  with  Ukraine  for  the 
implementation  of  the  actions  set  out  in  this  Regulation  which  concern  Ukraine  or 
legal entities established in Ukraine receiving Union funds.  

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2. 

3. 

4. 

1. 

2. 

The framework agreement concluded with Ukraine, taken as a whole, and contracts 
and  agreements  signed  with  legal  entities  established  in  Ukraine  receiving  Union 
funds,  shall  ensure  that  the  obligations  set  out  in  Article  129  of  the  Financial 
Regulation can be fulfilled. 

The framework agreement shall lay down the obligations of the Ukrainian authorities 
and  bodies  entrusted  of  budget  implementation  tasks  to  take  all  the  necessary 
measures including legislative, regulatory and administrative measures to respect the 
principles  of  sound  financial  management,  transparency  and  non-discrimination,  to 
ensure  the  visibility  of  Union  action  when  managing  the  Union  funds,  to  fulfil  the 
appropriate  control  and  audit  obligations  and  assume  the  resulting  responsibilities, 
and to protect the financial interests of the Union, by, in particular, detailed enacting 
provisions concerning: 

(a) 

(b) 

(c) 

(d) 

(e) 

the  activities  related  to  control,  supervision,  monitoring,  evaluation,  reporting 
and  audit  of  Union  funding  under  the  Programme,  as  well  as  investigations, 
anti-fraud measures and cooperation; 

rules on taxes, duties and charges in accordance with Article 27(9) and (10) of 
Regulation (EU) 2021/947; 

the right of the Commission to monitor activities under this Regulation carried 
out by the legal entities established in Ukraine, along the whole project cycle, 
including for cooperation for common procurement action, to take part in these 
as observer, as appropriate, and to make recommendations for the improvement 
of  such  activities  and  commitment  by  the  Ukrainian  authorities  to  make  their 
best  efforts  to  implement  such  recommendations  of  the  Commission  and  to 
report on this implementation; 

the  obligations  referred  to  in  Article  64(2),  including  precise  rules  and 
timeframe on collection of data by Ukraine and access for the Commission and 
OLAF; 

the  preservation  of  security  interests,  including  a  level  of  protection  of 
classified information and confidentiality equivalent to that set out in Articles 
59 and 60; 

(f) 

provisions on protection of personal data. 

Funding shall only be granted to Ukraine after the framework agreement has entered 
into  force  and  that  the  actions  needed  to  implement  the  requirements  it  establishes 
have been implemented by the parties. 

Article 60 

Application of the rules on classified information  

The  originatorship  of  classified  foreground  information  generated  in  implementing 
eligible  actions  listed  under  Article  11,  shall  be  under  the  responsibility  of  the 
participating  Member  States  who  will  establish  the  applicable  security  framework 
under relevant national laws. 

Such  a  security  framework  shall  be  without  prejudice  to  the  possibility  for  the 
Commission to have access to the necessary information for carrying out the action. 

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3. 

4. 

5. 

1. 

2. 

3. 

4. 

5. 

1. 

8 

9 

The Commission shall protect classified information received in accordance with the 
security  rules  set  out  in  Decision  (EU,  Euratom)  2015/444  and  Decision 
2013/488/EU. 

The applicable security framework for the action has to be put in place at the latest 
before the signature of the grant agreement or the contract. The relevant documents 
shall form integral part of the Grant Agreement. 

The  Commission  shall make  available  approved  and  accredited  existing  systems  to 
facilitate the exchange of classified information between the Commission, the High-
Representative /  Head of Agency,  the Member States and associated  countries and, 
where appropriate, with the applicants and the recipients. 

Article 61 

Confidentiality and processing of 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, the Commission and the High-Representative / Head of Agency shall 
ensure the protection of trade and business secrets and other sensitive and classified 
information  acquired  and  generated  in  application  of  this  Regulation  in  accordance 
with Union law and the respective national law. 

Member States,the Commission and the High-Representative / Head of Agency 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  entity  when  the  sharing  of  the  information  results  in  potential 
commercial or reputational damage to that entity or in divulging any trade secrets. 

The  Commission  shall  handle  information  containing  any  data  of  an  entity  or  any 
trade secrets in a way not less stringent than the handling of Sensitive non Classified 
Information,  including  the  application  of  the  “need  to  know  principle”  and  the 
handling and sharing in appropriate encrypted environments. 

Article 62 

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  Council (8) and  Directive 2002/58/EC  of  the 
European  Parliament  and  of  the  Council (9),  or  the  obligations  of  the  Commission 

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). 
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). 

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and,  where  appropriate,  other  Union  institutions,  bodies,  offices  and  agencies, 
relating to their processing of personal data under Regulation (EU) 2018/1725 of the 
European Parliament and of the Council (10), when fulfilling their responsibilities. 

2. 

3. 

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

Where the 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 63 

Audits 

Audits on the use of  the Union contribution  carried out  by persons or entities, including  by 
persons  or  entities  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 64 

Protection of the financial interests of the Union 

1. 

Where an associated country participates in  the Programme by means of a decision 
adopted pursuant to the Agreement on the European Economic Area or on the basis 
of any other legal instrument, 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 
(EU, 
Euratom) No 883/2013. 

inspections,  as  provided 

in  Regulation 

for 

2. 

The agreement referred to in Articles 59 shall provide for the obligations of Ukraine: 

(a) 

(b) 

(c) 

to  take  appropriate  measures  to  prevent,  detect  and  correct  fraud,  corruption, 
conflicts  of  interests  and  irregularities  affecting  the  financial  interests  of  the 
Union, to avoid double funding and to take legal actions to recover funds that 
have been misappropriated; 

to regularly check that the financing provided has been used in accordance with 
the  applicable  rules,  in  particular  regarding  the  prevention,  detection  and 
correction of fraud, corruption, conflicts of interests and irregularities; 

to accompany a request for payment under the Programme by a declaration that 
the  funds  were  used  in  accordance  with  the  principle  of  sound  financial 
management  and  for  their  intended  purpose  and  managed  appropriately  in 

10 

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). 

EN 

73 

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particular  in  accordance  with  Ukrainian  rules  complemented  by  international 
standards,  on  prevention,  detection  and  correction  of  irregularities,  fraud, 
corruption and conflicts of interests; 

(d) 

to  expressly  authorise  the  Commission,  OLAF,  the  Court  of  Auditors  and, 
where applicable, EPPO to exert their rights as provided for in Article 129(1) 
of the Financial Regulation, in application of the principle of proportionality. 

Article 65 

Information, communication and publicity 

The recipients of Union funding shall acknowledge the origin of the 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  Programme,  to  actions  taken  pursuant  to  the  Programme  and  to  the  results 
obtained. 

Financial  resources  allocated  to  the  Programme  shall  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. 

Financial resources allocated to the Programme may 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 66 

Evaluation 

By  30 June  2027,  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, 
particularly  with  regard  to  the  evolution  of  the  security  context  and  any  persistent 
risks in relation to the supply of defence products. The evaluation report shall build 
on consultations of the Member States and key stakeholders. 

The Commission shall present the report to the European Parliament and the Council, 
accompanied, where appropriate, by relevant legislative proposals. 

1. 

2. 

3. 

4. 

1. 

2. 

Article 67 

Entry into force 

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

EN 

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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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LEGISLATIVE FINANCIAL STATEMENT 

FRAMEWORK OF THE PROPOSAL/INITIATIVE 

Title of the proposal/initiative 

Policy area(s) concerned 

The proposal/initiative relates to: 

Objective(s) 

1. 

1.1. 

1.2. 

1.3. 

1.4. 

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. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE 

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3.1. 

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

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 

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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 European Defence Industry Programme and a framework of measures to ensure 
the timely availability and supply of defence products (‘EDIP’) 

1.2. 

Policy area(s) concerned  

Union defence industrial policy  

1.3. 

The proposal/initiative relates to:  

 a new action following a pilot project/preparatory action11  

 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 Programme establishes a set of measures aimed at supporting defence readiness 
of the Union and its Member States through the strengthening of the competitiveness, 
responsiveness  and  ability  of  the  European  Defence  Technological  and  Industrial 
Base (EDTIB) to ensure the timely availability and supply of defence products and at 
contributing  to  the  recovery,  reconstruction  and  modernisation  of  the  Ukraine 
Defence Technological and Industrial Base (Ukrainian DTIB), in particular by means 
of the following: 

(1) 

(2) 

(3) 

the  establishment  of  the  European  Defence  Industrial  Programme  (the 
‘Programme’),  comprising  measures 
the 
competitiveness, responsiveness and ability of the EDTIB, which may include 
the  establishment  of  a  fund  for  the  acceleration  of  defence  supply  chain 
transformation (‘FAST’); 

strengthening  of 

the 

for 

the establishment of a cooperation programme with Ukraine with a view to the 
recovery, 
the  Ukraine  Defence 
Technological and Industrial Base (the ‘Ukraine Support Instrument’); 

reconstruction  and  modernisation  of 

a  legal  framework  laying  down  the  requirements  and  procedures  for  and  the 
effects  of  setting-up  the  Structure  for  European  Armament  Programme 
(‘SEAP’) ; 

(4) 

a  legal  framework  aiming  at  ensuring  security  of  supply,  removing  obstacles 
and bottlenecks and supporting the production of defence products; 

(5) 

the establishment of a Defence Industrial Readiness Board.  

11 

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

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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:  EDIP  should contribute to  closing  the funding gap until  2027, by 
providing financial support for the reinforcement of the European and of the Ukraine 
DTIB, in a predictable, continuous and timely manner on the basis of an integrated 
approach. 

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 Programme 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 defence products within the EU; 

- reduction of production lead time; 

- number of Member States participating in cooperation for common procurement;  

- 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; 

- increase of support to Ukraine. 

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  and  indirect 
management,  in  particular  for  the  implementation  of  blending  operations.  The 
Commission will need to be staffed with the appropriate experts in order to monitor 
effectively  the  implemention,  including  where  implementation  is  entrusted  to  third 
parties based on a contribution agreement. 

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  Analysis 
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 

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4 

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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  defence  products  which  overcome  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 
derisking, 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  and  incentivizing  the  cooperation  for  common  procurement 
will  allow  a  faster  adaptation  to  ongoing  structural  market  change.  The  proposed 
measures  will  also  encourage  the  EDTIB’s  and  Ukraine  DTIB’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  Programme  will  integrate  two  running  EU  instruments,  the  Instrument  for  the 
Reinforcement  of  the  European  Defence  Industry  through  common  Procurement 
(EDIRPA)  and  the  Regulation  supporting  Ammunition  Production  (ASAP),  and 
existing EU programmes such as the European Defence Fund. It will also take into 
account other EU defence initiatives such as the Permanent Structured Cooperation 
(PESCO)  or  the  Strategic  Compass  for  Security  and  Defence.  It  will  generate 
synergies with other EU programmes.  

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

redeployment 

N/A 

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1.6. 

Duration and financial impact of the proposal/initiative 

 limited duration  

–    in effect from 2025 to 31/12/2027  

–    Financial impact from 2025 to 2027 for commitment appropriations and from 

2026 to 2033 for payment appropriations.   

 unlimited duration 

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

–  followed by full-scale operation. 

1.7.  Method(s) of budget implementation planned12  

 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 are provided with 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  are  provided  with 
adequate financial guarantees; 

–   bodies or 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. 

– 

If more than one management mode is indicated, please provide details in the ‘Comments’ section. 

Comments  

The European Defence Industry Programme shall be implemented in direct management and 
indirect management in accordance with the Financial Regulation. 

12 

Details of budget implementation methods and references to the Financial Regulation may be found on 
the BUDGpedia site: https://myintracomm.ec.europa.eu/corp/budget/financial-rules/budget-
implementation/Pages/implementation-methods.aspx 

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2. 

MANAGEMENT MEASURES  

2.1.  Monitoring and reporting rules  

Specify frequency and conditions. 

In  accordance  with  article  63  of  the  Programme  the  Commission  will  draw  up  an 
evaluation report not later dan 30/06/2027 for the Programme and submit it to the EP 
and  Council.  The  report  shall  evaluate  the  impact  and  effectiveness  of  the  actions 
under  the  Programme.  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 
Programme.  In  particular,  the  Commission  intends  to  implement  the  Programme 
mainly  in  direct  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 or 
several  work  programmes.  The  definition  of  priorities  should  be  supported  by  the 
work  of  the  Defence  Industry  Readiness  Board.  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  work  programmes 
following the opinion of the committee under the examination procedure. 

The funding under the Programme will mainly 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.  financing  not  linked  to  costs)  in  its  grants  in  order  to 
reduce  the  administrative  burden  for  the  beneficiaries  and  focus  the  effort  on  the 
results  of  the  actions,  in  particular  where  recipients  of  funding  are  Member  States 
contracting authorities. 

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. 

Special attention will be paid to actions benefitting Ukraine. The control mechanisms 
in  place provide  a framework to  ensure that  all the appropriate measures to  protect 
the financial interests of the Union are in place. It will guarantee that the principle of 
proportionality  is  taken  into  account  and  the  specific  conditions  under  which  the 
Programme will operate. 

EN 

7 

  EN 

2.2.2. 

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

The Programme is meant to support the reinforcement of the European and Ukraine 
DTIB.  

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  Member 
States’ Armed Forces and Ukraine, coordination of demand between Member States, 
is a precondition.  

The  Commission  would therefore  implement  the  Programme  in  direct  management 
building on the expertise gained in implementing the European Defence Fund, ASAP 
and  EDIRPA  prepare  and  adopt  work  programmes  in  a  timely  manner,  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 mainly be implemented under direct management. 
Based on the Commission experience on grant management, the overall control costs 
of  the  Programme  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.  

Financial  contribution  may  be  provided  in  the  form  of  financing  not  linked  to  cost 
referred to in point (a) of Article 125(1) of Regulation (EU, Euratom) No 2018/1046. 

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 security clearance, can also make on site visits. 

EN 

8 

  EN 

3. 

3.1. 

ESTIMATED FINANCIAL IMPACT OF THE PROPOSAL/INITIATIVE  

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  

[XX.YY.YY.YY] 

Diff./Non-
diff.13 

from 
EFTA 
countries
14 

from 
candidate 
countries 
and 
potential 
candidates
15 

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. 

Budget line 

Type of 
expenditure 

Heading of 
multiannual 
financial 
framework 

Number  

Diff./Non-
diff. 

from 
EFTA 
countries 

Contribution  

from 
candidate 
countries 
and 
potential 
candidates 

from  
other 
third 
countries 

other assigned 
revenue  

5 

5 

6 

6 

13.0106  -  Support  expenditure  for  the 
EDIP Programme 

13.0801 - EDIP Programme 

14.01xx  –  Support  expenditure  for  the 
Ukraine Support Instrument 

14.0901 – Ukraine Support Instrument 

Non-
diff. 

Diff. 

Non-
diff. 

Diff. 

YES 

pm 

YES 

YES 

YES 

pm 

YES 

YES 

NO 

pm 

YES 

YES 

NO 

pm 

YES 

YES 

13 
14 
15 

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 

9 

  EN 

 
 
 
 
 
3.2. 

Estimated financial impact of the proposal on appropriations  

3.2.1. 

Source of financing of appropriations under the new European Defence Industry Programme 

Contribution from 
European Defence 
Fund 

Capability 
development  

Defence research 

Total EDF 

2021 

2022 

2023 

2024 

2025 

2026 

2027 

Total 

411.200 

585.248 

1.000.000 

3.552 

3.552 

208.600 

287.848 

500.000 

619.800 

876.648 

1.500.000 

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) 

2021 

2022 

2023 

2024 

2025 

2026 

2027 

Post 
2027  TOTAL 

13.0801 Operational 
appropriations EDIP - 

Commitments 

(1) 

615.248 

872.096 

1.487.344 

EN 

10 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Programme 

Payments 

(2) 

13.0106 – Support 
expenditure EDIP - 
Programme 

Commitments 
= Payments 

(3) 

TOTAL appropriations for 
the envelop of the 
programme under heading 
5 

Commitments 

Payments 

=1+
3 

=2+
3 

310.000 

440.000 

737.344 

1.487.344 

3.552 

4.552 

4.552 

12.656 

3.552 

619.800 

876.648 

1.500.000 

3.552 

314.552 

440.552 

737.344 

1.500.000 

EN 

11 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Heading of multiannual financial  
framework  

06 

NEIGHBOURHOOD AND THE WORLD – Cluster 14 – External Action 

2021 

2022 

2023 

2024 

2025 

2026 

2027 

Post 
2027 

TOTAL 

14.0901 – Ukraine Support 
Instrument 

Commitments 

Payments 

14.01xx – Support 
expenditure Ukraine Support 
Instrument 

Commitments 
= Payments 

TOTAL appropriations for 
the envelop of the 
programme under heading 
6 

Commitments 

Payments 

TOTAL operational 
appropriations (all operational 
headings) 

Commitments 

Payments 

(1) 

(2) 

(3) 

=1 

=2 

(4) 

(5) 

TOTAL appropriations of an 
administrative nature financed 
from the envelope for specific 
programmes (all operational 
headings) 

Commitments 
= Payments 

(6) 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

pm  

pm  

pm  

pm 

pm 

pm 

pm 

pm 

pm 

pm 

pm 

615.248 

872.096 

1.487.344 

310.000 

440.000 

737.344 

1.487.344 

3.552 

4.552 

4.552   

12.656 

EN 

12 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL appropriations 
under HEADINGS 1 to 6 of 
the multiannual financial 
framework 

Commitments 

=4+6 

Payments 

=5+6 

3.552 

619.800 

876.648 

1.500.000 

3.552 

314.552 

440.552 

737.344 

1.500.000 

Heading of multiannual financial  
framework  

7 

‘Administrative expenditure’ 

This section should be filled in using the 'budget data of an administrative nature' to be firstly introduced in the Annex to the Legislative 
Financial Statement (Annex 5 to the Commission decision on the internal rules for the implementation of the Commission section of the general 
budget of the European Union), which is uploaded to DECIDE for interservice consultation purposes. 

Human resources  

Other administrative expenditure  

TOTAL appropriations under 
HEADING 7 of the multiannual 
financial framework 

(Total commitments 
= Total payments) 

EUR million (to three decimal places) 

2021 

2022 

2023 

2024 

2025 

2026 

2027 

Post 
2027 

TOTAL 

3.712 

3.712 

3.712 

11.136 

0.258 

0.258 

0.131 

0.647 

3.970 

3.970 

3.843 

11.783 

EUR million (to three decimal places) 

EN 

13 

EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2021 

2022 

2023 

2024 

2025 

2026 

2027 

Post 
2027 

TOTAL 

TOTAL 
appropriations  
across 
HEADINGS  
of the multiannual 
financial 
framework  

Commitments 

7.522 

623.770 

880.491 

1.511.783 

Payments 

7.522 

318.522 

448.395 

737.344 

1.511.783 

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) 

Years 

2021 

2022 

2023 

2024 

2025 

2026 

2027 

TOTAL 

HEADING 7 
of the multiannual 
financial framework 

Human resources  

Other administrative 
expenditure  

Subtotal HEADING 7 
of the multiannual 
financial framework  

Outside HEADING 7 
of the multiannual 
financial framework  

Human resources  

Other expenditure  
of an administrative 
nature (former BA 
lines) 

Subtotal  
outside HEADING 7 
of the multiannual 
financial framework  

3.712 

3.712 

3.712 

11.136 

0.258 

0.258 

0.131 

0.647 

3.970 

3.970 

3.843 

11.783 

3.552 

3.552 

3.552 

10.656 

3.552 

3.552 

3.552 

10.656 

TOTAL 

7.522 

7.522 

7.395 

22.439 

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. 

EN 

15 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 

Year 
2025 

Year 
2026 

Year 
2027 

Year 
N+3 

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

 Establishment plan posts (officials and temporary staff) 

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

20 01 02 03 (Delegations) 

01 01 01 01  (Indirect research) 

 01 01 01 11 (Direct research) 

Other budget lines (specify) 

 External staff (in Full Time Equivalent unit: FTE)16 

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

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

13 01  Support expenditure for 
the European Defence Industry 
Programme  17 

- 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 

19 

1 

19 

1 

19 

1 

31 

2 

31 

2 

31 

2 

53 

53 

53 

13 is the policy area or budget title concerned. 

The establishment plan posts required will be met by staff from the DG who 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 

The  FTEs  sought  will  work  on  the  policy  development,  legal  issues,  with  particular 
focus on grant and procurement matters, financial management, contract management, 
audit and evaluation. 

External staff 

The  FTEs  sought  will  work  on  the  policy  development,  legal  issues,  with  particular 
focus on grant and procurement matters, financial management, contract management, 
audit and evaluation. 

16 

17 

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). 

EN 

16 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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). 

Heading 5. See details in section 3.2. 

–    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. 

Explain  what  is  required,  specifying  the  headings  and  budget  lines  concerned,  the  corresponding 
amounts, and the instruments proposed to be used. 

–    requires a revision of the MFF. 

Explain what is required, specifying the headings and budget lines concerned and the corresponding 
amounts. 

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) 

as specified in Article 6 

TOTAL appropriations 
co-financed  

2025 

2026 

2027 

pm 

pm  

pm  

pm  

pm  

pm  

Total 

pm  

pm  

EN 

17 

  EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
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/initiative18 

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). 

18 

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 

  EN