Russia’s aggression against Ukraine prompted the European Union to strengthen its defence policy, leading to the presentation of the “Rearm Europe Plan” in March 2025, with potential funding of up to €800 billion. This plan includes the SAFE regulation, which mobilises €150 billion in loans to support joint investments in defence products, accelerate production, and reinforce the European defence industry. SAFE sets out simplified rules for public procurement and gives priority to the participation of European companies. Its implementation is pending approval by the Council and the launch of a call for expressions of interest from Member States.
Background
Russia’s military aggression against Ukraine has marked the dramatic return of territorial conflict and high-intensity warfare on European soil. This structural change in the European security and defence and European geopolitics, has led European Union (EU) Member States to rethink their defence plans and capacities.
The EU Heads of State or Government, meeting in Versailles on 10 and 11 March 2022, committed to “bolster European defence capabilities”. These aims were reiterated in the Strategic Compass for Security and Defence.
The EU has adopted two emergency instruments to face the immediate consequences of Russia’s war of aggression against Ukraine, namely the Regulation establishing an instrument for the reinforcement of the European defence industry through common procurement (EDIRPA) and the Regulation on supporting ammunition production (ASAP).
On March 2023, the European Commission and High Representative also presented a European Defence Industrial Strategy (EDIS) which highlighted that EU Member States were still buying predominantly alone and from abroad. This observation was confirmed by the report on the future of European competitiveness, authored by Professor Mario Draghi. EDIS consequently underlined the need for Member States to spend more, better, together and European in order to reverse negative trends affecting the European Defence Technological and Industrial Base (EDTIB) and effectively enhance the EU’s defence industrial readiness.
In this context, the European Commission presented a five-pillar ReArm Europe Plan to the European Council on 6 March 2025. It aims to address the urgency of the situation by unlocking up to EUR 800 billion. This framework has now led to a Council proposal, dated 19 March 2025, for a Regulation, with a EUR 150 billion funding, aiming at mobilising the Union budget to support and accelerate national investments through a new financial EU instrument: the Regulation establishing the Security Action For Europe (SAFE) through the reinforcement of the European defence industry instrument.
Key Insights of the SAFE Regulation proposal
- The SAFE lays down the rules on simplified and accelerated common procurement procedures for the acquisition of defence products and other products for defence purposes belonging to the following categories:
- ammunition and missiles; artillery systems; small drones (NATO class 1) and related anti-drone systems; critical infrastructure protection; cyber and military mobility;
- air and missile defence; drones other than small drones (NATO class 2 and 3) and related anti-drone systems; strategic enablers; space assets protection; artificial intelligence and electronic warfare.
- SAFE provides financial assistance to Member States for activities, expenditures and measures related to defence products carried out through common procurement aiming at:
- speeding up, in a collaborative manner, the adjustment of the defence industry to structural changes, including through the creation and ramp-up of its manufacturing capacities as well as related supporting activities;
- improving the timely availability of defence products, including through the reduction of their delivery lead time, reservation of manufacturing slots or stockpiling of defence products, intermediate products or raw materials.
- The financial assistance takes the form of loans granted by the Union to the Member States, totalling EUR 150 billion of financial assistance;
- Member States wishing to receive financial assistance under the SAFE must submit a European Defence Industry Investment Plan to the Commission within six months as of the entry into force of the SAFE;
- The SAFE provides for the participation conditions for contractors and subcontractors involved in the common procurement. As a rule, contractors and subcontractors at stake shall be established and have their executive management structures in the Union, EEA EFTA States or Ukraine. Third country contractors are subject to a screening procedure, appropriate mitigating measures or, if applicable, guarantees, under a standardised template provided by the Commission;
- To facilitate the exchange of classified information and sensitive information between the Commission and the Member States and, where appropriate, with the contractors or other final recipients, the Commission shall implement a secured exchange information system.
Next Steps
- SAFE regulation approval by the Council;
- The Commission will launch a call for expressions of interest, requesting interested Member States to provide, within a two-month period, a target for the financial assistance requested as well as an indicative maximum and minimum loan amount;
- The Commission shall afterwards notify the interested Member States, within two weeks, about the allocations of the loan amounts available to each Member State.
Beyond the matter addressed in this Legal Alert, Morais Leitão continues to closely monitor all legal instruments related to the EU Defence sector.
