Article 1 Subject matter
This Regulation establishes a set of measures and lays down a budget aimed at urgently strengthening the responsiveness and ability of the European Defence Technological and Industrial Base (EDTIB) to ensure the timely availability and supply of ground-to-ground and artillery ammunition as well as missiles (‘relevant defence products’), in particular by means of the following: (a) an instrument financially supporting industrial reinforcement for the production of relevant defence products in the Union, including through the supply of their components (the ‘Instrument’); (b) the establishment of mechanisms, principles and temporary rules to secure the timely and lasting availability of relevant defence products to their acquirers in the Union. Based on an evaluation, pursuant to Article 23, of the results achieved by the implementation of this Regulation by 30 June 2024, particularly with regard to the evolution of the security context, the Commission may consider the opportunity to extend the applicability of the set of measures provided for in this Regulation and the allocation of the corresponding additional budget.
Article 2 Definitions
For the purposes of this Regulation, the following definitions apply: (1) ‘raw materials’ means the materials required to produce relevant defence products; (2) ‘bottleneck’ means a point of congestion in a production system that stops or severely slows down the production; (3) ‘recipient’ means an entity with which a funding or financing agreement has been signed, or to which a funding or financing decision has been notified; (4) ‘applicant’ means a natural person or an entity that has submitted an application in a grant award procedure; (5) ‘control’ means the ability to exercise a decisive influence over an entity directly or indirectly through one or more intermediate entities; (6) ‘executive management structure’ means a body of an entity, appointed in accordance with national law, and, where applicable, reporting to the chief executive officer, which is empowered to establish that entity’s strategy, objectives and overall direction, and which oversees and monitors the entity’s management decision-making; (7) ‘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 Financial Regulation; (8) ‘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 ( 23 ) ; (9) ‘sensitive information’ means information and data that are 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; (10) ‘non-associated third-country entity’ means an entity that is established in a non-associated third country or, where it is established in the Union or in an associated country, that has its executive management structures in a non-associated third country; (11) ‘lead production time’ means the period of time between a purchase order being placed and the manufacturer completing the order; (12) ‘relevant defence products’ means ground-to-ground and artillery ammunition as well as missiles; (13) ‘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 the Financial Regulation, that combines non-repayable forms of support or financial instruments from the Union budget with repayable forms of support from development or other public finance institutions as well as from commercial finance institutions and investors; (14) ‘Seal of Excellence’ means a quality label which shows that a proposal submitted to a call for proposals under the Instrument has passed all of the evaluation thresholds set out in the work programme, but could not be funded due to a lack of budget available for that call for proposals in the work programme, and might receive support from other Union or national sources of funding.
Article 3 Third countries associated to the Instrument
The Instrument shall be open to the participation of members of the European Free Trade Association which are members of the European Economic Area (‘associated countries’), in accordance with the conditions laid down in the Agreement on the European Economic Area.
Article 4 Objectives of the Instrument
1. The objective of the Instrument is to foster the efficiency and competitiveness of the European Defence Technological and Industrial Base (EDTIB) to support the ramp-up of the production capacity and timely delivery of relevant defence products through industrial reinforcement. 2. The industrial reinforcement shall in particular consist of initiating and speeding up the adjustment of industry to the rapid structural changes imposed by the supply crisis affecting the relevant defence products which are necessary for the swift replenishment of the ammunition and missile stocks of the Member States and of Ukraine. That shall include the improvement of the capacity of adaptation of supply chains for relevant defence products and the acceleration of such adaptation, the creation of manufacturing capacities or their ramp-up, and a reduction of the lead production time for relevant defence products throughout the Union, in particular through the intensification and widening of cross-border cooperation between the relevant entities.
Article 5 Budget
1. The financial envelope for the implementation of the Instrument for the period 25 July 2023 to 30 June 2025 shall be EUR 500 million in current prices. 2. Within the financial envelope referred to in paragraph 1 of this Article, up to EUR 50 million may be used as a blending operation in the framework of the Ramp-up Fund provided for in Article 15. 3. The financial envelope referred to in paragraph 1 may also be used for technical and administrative assistance for the implementation of the Instrument, such as preparatory, monitoring, control, audit and evaluation activities including corporate information technology systems. 4. Budgetary commitments for activities extending over more than one financial year may be broken down over several years into annual instalments. 5. The budget of the Instrument may be reinforced, where necessary or where the applicability of this Regulation is extended in accordance with Article 1, second paragraph.
Article 6 Cumulative and alternative funding
1. The Instrument shall be implemented in synergy with other Union programmes. An action that has received a contribution under the Instrument may also receive a contribution from another Union programme, provided that the contributions do not cover the same costs. The rules of the relevant Union programme shall apply to the corresponding contribution to the action. The cumulative financing shall not exceed the total eligible costs of the action. The support from the different Union programmes may be calculated on a pro rata basis in accordance with the documents setting out the conditions for support. 2. In order to be attributed a Seal of Excellence label, the actions shall comply with the following cumulative conditions: (a) they have been assessed in a call for proposals under the Instrument; (b) they comply with the minimum quality requirements of that call for proposals; and (c) they are not financed under that call for proposals due to budgetary constraints. 3. When proposing amended or new recovery and resilience plans in accordance with Regulation (EU) 2021/241, Member States may include measures which also contribute to the objectives of the Instrument, particularly measures linked to proposals submitted to a call for proposals under the Instrument which were awarded a Seal of Excellence. 4. Article 8(5) shall apply by analogy to actions funded in accordance with this Article.
Article 7 Forms of Union funding
1. The Instrument shall be implemented under direct management and, with regard to the Ramp-up Fund provided for in Article 15 of this Regulation, under indirect management with bodies referred to in Article 62(1), point (c), of the Financial Regulation. The Instrument may provide funding in any of the forms laid down in the Financial Regulation, including financing in the form of financial instruments within blending operations. Blending operations shall be carried out in accordance with Title X of the Financial Regulation, Regulation (EU) 2021/523 and Article 15 of this Regulation. 2. By way of derogation from Article 193(2) of the Financial Regulation, financial contributions may, where relevant and necessary for the implementation of an action, cover actions started prior to the date of the submission of the proposal for those actions, provided that those actions did not start before 20 March 2023 and have not been completed before the signature of the grant agreement.
Article 8 Eligible actions
1. Only actions implementing the objectives set out in Article 4 shall be eligible for funding. 2. The Instrument shall provide financial support for actions addressing identified bottlenecks in production capacities and supply chains with a view to securing and accelerating the production of relevant defence products in order to ensure their effective supply and timely availability. 3. Eligible actions shall relate to one or more of the following activities and shall be exclusively related to the production capacities of relevant defence products, including their components and corresponding raw materials insofar as they are intended or used wholly for the production of relevant defence products: (a) the optimisation, expansion, modernisation, upgrading or repurposing of existing, or the establishment of new, production capacities, in relation to relevant defence products or their components and corresponding raw materials, insofar as those components and raw materials are used as direct input for the production of relevant 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; (b) 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 reservation of components and the corresponding raw materials insofar as those components and raw materials are used as direct input for the production of relevant defence products, as well as to coordinate production capacities and production plans; (c) the building-up and making available of reserved surge manufacturing capacities of relevant defence products, their components and corresponding raw materials, insofar as those components and raw materials are used as direct input for the production of relevant defence products, in accordance with ordered or planned production volumes; (d) the testing, including the necessary infrastructure, and, as appropriate, reconditioning certification of relevant defence products with a view to addressing their obsolescence and making them useable by end users; (e) the training, reskilling or upskilling of personnel in relation to the activities referred to in points (a) to (d); (f) the improvement of the access to finance for the relevant economic operators active in the production of or making available of relevant defence products, by means of the offset of any additional cost arising specifically from the defence industry sector, for investments related to activities referred to in points (a) to (e). 4. The following actions shall not be eligible for funding under the Instrument: (a) actions related to the production of goods or delivery of services which are prohibited by applicable international law; (b) actions related to the production of lethal autonomous weapons without the possibility of meaningful human control over selection and engagement decisions when carrying out strikes against humans; (c) actions or parts thereof, that are already fully financed from other public or private sources. 5. When concluding agreements with individual recipients the Commission shall ensure that the Instrument only finances activities which exclusively benefit production capacities of relevant defence products, or of their components and corresponding raw materials insofar as they are intended or used wholly for the production of relevant defence products.
Article 9 Financing rate
1. The Instrument shall finance up to 35 % of the eligible costs of an eligible action related to the production capacities of relevant defence products, and up to 40 % of the eligible costs of an eligible action related to the production capacities of components and raw materials insofar as they are intended or used wholly for the production of relevant defence products. 2. By way of derogation from paragraph 1, an action shall be eligible for an increased funding rate of 10 additional percentage points where it fulfils one of the following criteria: (a) where applicants demonstrate a contribution to the creation of new cross-border cooperation between entities established in Member States or associated countries, as described in Article 8(3), point (b); (b) where applicants commit to prioritising, for the duration of the action, orders stemming from: (i) the common procurement of relevant defence products by at least three Member States or associated countries; or (ii) the procurement of relevant defence products by at least one Member State for the purpose of transferring those relevant defence products to Ukraine; or (c) where the beneficiary is an SME or mid-cap established in a Member State or in an associated country or where the majority of beneficiaries participating in a consortium are SMEs or mid-caps established in Member States or in associated countries. The commitment referred to in the first subparagraph, point (b), shall apply to the procurement of any product directly or indirectly benefitting from support under the Instrument. The increased funding rate referred to in the first subparagraph shall be fixed at 10 additional percentage points even in the event that more than one of the criteria set out in points (a), (b) and (c) of that subparagraph are met. By way of derogation from paragraph 1 of this Article, support from the Instrument may cover up to 100 % of the eligible costs of an activity referred to in Article 8(3), point (f). 3. The recipients shall demonstrate that the costs of an action that are not covered by Union support are to be covered by other means of financing.
Article 10 Eligible entities
1. Recipients involved in an action supported under the Instrument shall be entities, whether public or privately owned, which are established and have their executive management structures in the Union or in an associated country. Those recipients shall either not be subject to control by a non-associated third country or by a non-associated third country entity or, alternatively, they shall have been subject to screening within the meaning of Regulation (EU) 2019/452 and, where necessary, to mitigation measures, taking into account the objectives referred to in Article 4 of this Regulation. 2. An undertaking established in the Union or in an associated country that is controlled by a non-associated third country or a non-associated third-country entity and that has not been subject to screening within the meaning of Regulation (EU) 2019/452 and, where necessary, to mitigation measures, shall only be eligible to be a recipient involved in an action supported under the Instrument if guarantees approved by the Member State or the associated country in which the undertaking is established are made available to the Commission in accordance with its national procedures. The guarantees shall ensure that the involvement of such an undertaking in an action would not contravene 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 TEU, or the objectives set out in Article 4 of this Regulation. The guarantees shall in particular substantiate that, for the purposes of an action, measures are in place to ensure that: (a) the recipient is able to carry out the action and to deliver results without any restrictions concerning its infrastructure, facilities, assets, resources, intellectual property or knowhow needed for the purposes of the action, or restrictions that undermine its capabilities and standards necessary to carry out the action; and (b) access by a non-associated third country or by a non-associated third-country entity to sensitive or classified information relating to the action is prevented and the employees or other persons involved in the action have national security clearance issued by a Member State or an associated country, where appropriate. 3. If considered to be appropriate by the Member State or the associated country in which the undertaking is established, additional guarantees may be provided. 4. Member States shall provide the Commission with a notification on the mitigation measures applied within the meaning of Regulation (EU) 2019/452 referred to in paragraph 1 of this Article or the guarantees referred to in paragraph 2 of this Article. Further information on the mitigation measures applied or the guarantees shall be made available to the Commission upon request. The Commission shall inform the committee referred to in Article 16 of any notification provided in accordance with this paragraph. 5. The infrastructure, facilities, assets and resources of the recipients involved in an action which are used for the purposes of an action supported by the Instrument shall be located on the territory of a Member State or of an associated country for the entire duration of an action. 6. The Instrument shall not financially support the ramp-up of production capacities for relevant defence products that are subject to a restriction by a non-associated third country or a non-associated third country entity that limits Member States’ ability to use them. The recipient shall make every effort to ensure that the action funded by the Instrument will allow for the delivery of outputs to Ukraine.
Article 11 Award criteria
Each proposal submitted by an applicant shall be assessed on the basis of one or more of the following criteria measuring the contribution of the action concerned to the industrial reinforcement sought to foster the efficiency and overall competitiveness of the EDTIB with respect to the relevant defence products: (a) increase in production capacity in the Union: the contribution of the action to the increase, ramp-up or reservation of manufacturing capacities, their modernisation or the reskilling and upskilling of the related workforce; (b) reduction of lead production time: the contribution of the action to the timely satisfaction of the demand expressed through procurement in terms of reduced lead production times, including via order reprioritisation mechanisms; (c) elimination of sourcing and production bottlenecks: the contribution of the action to the swift identification and rapid and lasting elimination of any sourcing (raw material and any other input) or production (manufacturing capability) bottlenecks; (d) resilience through cross-border cooperation: the contribution of the action to the development and operationalisation of cross-border cooperation between undertakings established in different Member States or associated countries, involving in particular, to a significant extent, SMEs or mid-caps as recipients, as subcontractors or as other undertakings in the supply chain; (e) support to procurement: the demonstration by the applicants of the link between the action and newly placed orders stemming from the joint procurement of relevant defence products by at least three Member States or associated countries especially if done in a Union framework; (f) the quality of the implementation plan of the action, including in terms of its processes and monitoring. The Commission shall, by means of implementing acts, award the funding under this Regulation. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 16(3).
Article 12 Work programme
1. The Instrument shall be implemented through a work programme as referred to in Article 110 of the Financial Regulation. The work programme shall set out, where applicable, the overall amount reserved for blending operations. 2. The work programme shall set out the funding priorities taking into account the work of the Defence Joint Procurement Task Force. 3. The Commission shall, by means of an implementing act, adopt the work programme referred to in paragraph 1 of this Article. That implementing act shall be adopted in accordance with the examination procedure referred to in Article 16(3).
Article 13 Acceleration of the permit-granting process for the timely availability and supply of relevant defence products
1. 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. 2. 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 14 Facilitation of common procurement during the ammunition supply crisis
1. Where at least two Member States enter into an agreement to commonly procure relevant defence products and where the extreme urgency deriving from the crisis resulting from Russia’s war of aggression against Ukraine prevents the use of any of the procedures provided for by Directive 2009/81/EC for the conclusion of a framework agreement, the rules provided for in this Article may be applied. 2. 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 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. 3. 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 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, 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 . 4. The principle of non-discrimination shall apply to 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. 5. Contracting authorities/entities 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. 6. Contracting authorities/entities may not use this Article improperly or in such a way as to prevent, restrict or distort competition. 7. Modifications introduced in the framework agreements pursuant to this Article shall be concluded by 30 June 2025.
Article 15 Ramp-up Fund
1. In order to leverage, de-risk and speed-up investments needed to increase manufacturing capacities, a blending facility offering debt solutions may be established (the ‘Ramp-up Fund’). 2. The specific objectives pursued by the Ramp-up Fund shall be the following: (a) improving the leverage effect of the Union budget spending and achieving a higher multiplier effect in terms of attracting private-sector financing; (b) providing support to companies facing difficulties in accessing finance, and addressing the need to underpin the resilience of the Union defence industry; (c) accelerating investment in the field of manufacturing relevant defence products and leveraging funding from both the public and the private sectors, while increasing the security of supply for the whole Union defence industry value chain; (d) enhancing access to finance for investments related to activities referred to in Article 8(3), points (a) to (e).
Article 16 Committee procedure
1. The Commission shall be assisted by a committee. That committee shall be a committee within the meaning of Regulation (EU) No 182/2011. 2. 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. 3. 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 17 Security of information
1. The Commission shall protect classified information received in relation to the implementation of this Regulation in accordance with the security rules set out in Commission Decision (EU, Euratom) 2015/444 ( 24 ) . 2. The Commission shall make use of existing or set up secured exchange systems in order to facilitate the exchange of sensitive and classified information between the Commission, the High Representative of the Union for Foreign Affairs and Security Policy, the EDA and the Member States and, where appropriate, with the entities subject to measures set out in this Regulation. That system shall take into account the Member States’ national security regulations.
Article 18 Confidentiality and processing of information
1. Information received as a result of the application of this Regulation shall be used only for the purpose for which it was requested. 2. Member States and the Commission shall ensure the protection of trade and business secrets and other sensitive and classified information acquired and generated in application of this Regulation in accordance with Union law and the respective national law. 3. Member States and the Commission shall ensure that classified information provided or exchanged under this Regulation is not downgraded or declassified without the prior written consent of the originator. 4. 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.
Article 19 Personal data protection
1. 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 ( 25 ) and Directive 2002/58/EC of the European Parliament and of the Council ( 26 ) , or the obligations of the Commission 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 ( 27 ) , when fulfilling their responsibilities. 2. 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. 3. 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 20 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 21 Protection of the financial interests of the Union
Where an associated country participates in the Instrument by means of a decision adopted pursuant to the Agreement on the European Economic Area, the associated country shall grant the necessary rights and access required for the authorising officer responsible, OLAF and the Court of Auditors to comprehensively exercise their respective competences. In the case of OLAF, such rights shall include the right to carry out investigations, including on-the-spot checks and inspections, as provided for in Regulation (EU, Euratom) No 883/2013.
Article 22 Information, communication and publicity
1. 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. 2. The Commission shall implement information and communication actions relating to the Instrument, to actions taken pursuant to the Instrument and to the results obtained. 3. Financial resources allocated to the Instrument 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. 4. Financial resources allocated to the Instrument 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 23 Evaluation
1. By 30 June 2024, the Commission shall draw up a report evaluating the implementation of the measures set out in this Regulation and their results, as well as the opportunity to extend their applicability and provide for their funding, particularly with regard to the evolution of the security context. The evaluation report shall build on consultations of the Member States and key stakeholders and be communicated to the European Parliament and to the Council. 2. Taking into account the evaluation report, the Commission may submit proposals for any appropriate amendments to this Regulation, particularly with a view to continuing to address any persistent risks in relation to the supply of relevant defence products.
Article 24 Entry into force and application
This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union . This Regulation shall apply until 30 June 2025. That shall not affect the continuation or modification of actions initiated pursuant to this Regulation or any actions necessary to protect the financial interests of the Union.