Defence sector evolving: 5 things you need to know

On 19 March 2025, the European Commission proposed the Security Action for Europe (SAFE) instrument, a key initiative under the ReArm Europe plan. This temporary emergency measure aims to bolster defence investments across Member States, offering up to EUR 150 billion in loans to Member States for air and missile defence, artillery systems, missiles and ammunition, drones and anti-drone systems, strategic enablers and critical infrastructure protection.

SAFE introduces immediate and novel derogations from EU public procurement rules, simplifying access to the negotiated procurement procedure without prior publication. This marks a notable departure from existing case law. Additionally, SAFE allows substantial modifications to existing contracts or framework agreements, including significant increases in the volume or value of contracts already awarded, beyond current limitations. We expect SAFE to be adopted relatively soon.

The Proposal for an EU Space Act, expected to be published this summer, will set rules for all satellite operators offering services within the EU, including those based in the United States and other non-EU countries.

We foresee the introduction of EU harmonised licensing requirements and standards for the safety, resilience, and sustainability of space operations. Given that cybersecurity obligations for ground segments are already covered under the Critical Entities Resilience Directive (CER) and the NIS2 Directive, we expect the EU Space Act to include specific cybersecurity standards and procedures tailored for the space domain.

Defence Omnibus Simplification initiative

Companies should be able to benefit from a coherent, simplified legal framework that reduces administrative and practical burdens facilitating the development and marketing of innovative technologies. This is particularly relevant considering the recent Defence Omnibus Simplification initiative, which aims at regulatory simplification and harmonisation in the defence sector.

Despite multiple postponements by the European Commission (DG DEFIS) and the lack of disclosed details on the proposal's content, we are closely monitoring developments. Our team is dedicated to keeping you informed and prepared for any changes.

The defence sector faces unique cybersecurity challenges from sophisticated hackers, including nation-state actors which threaten intellectual property, product security, and sensitive data, posing significant risks to national security. The integration of complex IT networks and reliance on third-party software increases vulnerabilities. While AI and ML offer defences, they can also enable advanced attacks. Breaches are growing in scale and sophistication, risking essential services and the global economy. Cybercrime entails complex jurisdictional issues and international legal challenges. New legislation necessitates strategic management of cyber risks. Organisations must take concrete steps to mitigate business and reputational risks.

Our team specialises in defending against sophisticated cyber threats, offering strategic advice on cybersecurity, internal controls, and secure infrastructure. We assist in adhering to cybersecurity laws and requirements such as the European Cyber Defence Policy to avoid penalties and maintain operational integrity. We specialise in proactive threat detection, insider risk monitoring, and data loss prevention to protect sensitive defence data and ensure data privacy. In the event of a cyber incident, our services include crisis management, digital forensic analysis, regulatory communication, and legal representation. We work with leading forensic experts to investigate cyber incidents and strengthen our defence strategies, reducing cyber risks.

In the defence and logistics sectors, staying updated with the ever-changing legislation, regulations, and licensing requirements in export control and international sanctions is crucial. The dynamic global geopolitical landscape, including conflicts like the war in Ukraine and the situation in Gaza, has led to the introduction of significant international sanctions and stricter regulation on exporting military goods, dual-use goods, so called strategic goods and a stronger demand for the export of these goods. This creates a pressing need for legal advice. The intensification of attention to export control and sanctions also leads to a greater focus on enforcement by, among others, criminal authorities.

Export control laws in the Netherlands, within the European context, regulate the export of strategic goods, technologies and services for national security reasons. Since 2014, the European Union has imposed severe economic and financial sanctions packages for Russia and Belarus.

Compliance is essential

Important things to consider are licensing requirements for exporting, transiting or importing dual-use and military goods, as well as related brokering services and technical assistance services. Compliance with international sanctions and export control regulations is essential to avoid enforcement actions and maintain business continuity. Exporting dual-use or military goods without the necessary licenses, or failing to comply with international sanctions, constitutes an economic offence and can lead to criminal enforcement. The Dutch Public Prosecution Service is particularly vigilant in this area.

Our team specialises in providing advice and assistance in criminal enforcement regarding export control, including dual-use, military goods and international sanctions. We help companies draft compliance clauses in contracts, manage reporting obligations, and screen third parties and end-users in to ensure compliance with export control laws and regulations.

The initiatives presented as part of the ReArm Europe plan provide substantial opportunities for financing of defence companies.

The European Commission has identified five pillars to urgently and significantly increase European defence spending. The first four pillars focus on public funding through the Security and Action for Europe (SAFE) financial instrument, coordinated activation of the National Escape Clause by all Member States (combined with SAFE to potentially unlock up to EUR 800bn for defence expenditure), increasing flexibility of existing EU instruments to allow greater defence investment, and contributions from the European Investment Bank.

Mobilising private capital for defence

The fifth pillar focusses on mobilising private capital. The new security context necessitates fresh investment, and defence companies must access private equity and debt financing to meet these needs. However, financial sector policies and practices currently limit access to financing for defence companies, particularly SMEs and mid-caps. The European Investment Bank will propose further adjustments to its eligibility criteria which are expected to influence private financial institutions.

Many of these institutions are now showing willingness to financing defence companies. Additionally, the ReArm Europe plan aims to clarify the relationship between defence and the investment goals of the EU’s Sustainable Finance Disclosures Regulation.

Our expertise lies in navigating these complex financial landscapes and we understand the intricacies of both public and private financing.