On May 29, 2025, the European Union established its new €150 billion defense fund through the Security Action for Europe (SAFE) regulation. The European Commission will soon launch a call for interest for SAFE loans and EU Member States will have up to two months to submit their applications.
In comparison to the draft version we discussed in our earlier blog on rearming Europe, eligibility conditions under Article 16 of the regulation have been subject to minor amendments to limit involvement of subcontractors outside of the EU, EEA-EFTA, and Ukraine.
- Such subcontractors must only be allocated between 15 % and 35 % of the value of the contract;
- In addition, they must have a prior direct contractual relationship with the relevant contractor or have the relevant contractor commit to study, within two years, the feasibility of replacing the input provided by that subcontractor with an EU/EEA/EFTA/Ukraine-origin alternative.
This significant increase in public resources available for security and defense is nearly equal to the combined total of annual defense spending across all of the EU. And it includes defense technology, such as artificial intelligence and electronic warfare, as one of the limited categories available for this funding.
This development comes amidst a flurry of EU activity to expand its set of trusted partners, who could potentially benefit from this funding. On May 19, 2025, the EU and the UK signed a Security and Defense Partnership, which will soon be followed by talks for an additional specific agreement under SAFE. And on June 10, 2025, the EU’s High Representative Kallas and India’s Foreign Minister Jaishankar discussed advancing cooperation in the field of security and defense. India expressed interest in engaging with the EU on the establishment of a Security and Defence Partnership, which would constitute a stepping stone to negotiate a further agreement to participate fully in SAFE procurements.
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The team at Covington is well placed to advise you on these policy developments, and how to engage with the relevant decision-makers in these areas. We can help gather intelligence, analyse legislative initiatives, navigate the complex regulatory environment at the EU and Member State level, and design and execute strategy.
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Pol Revert Loosveldt of Covington & Burling LLP contributed to the preparation of this article.