On 17 June 2025, the European Commission issued the Defence Readiness Omnibus, through which it proposes to amend key pieces of EU legislation to remove regulatory obstacles for the EU defence market. The initiative is part of a push to ramp up defence capabilities and spending to allow the EU to act more autonomously in defence matters. This alert breaks down the main components of the Omnibus proposal and explains what comes next.
Background
As highlighted in a previous client alert, the EU has set the goal of rebuilding its defence capabilities by 2030. The ReArm Europe Plan and the Defence White Paper of 19 March 2025 aim at scaling up the EU defence industry to support increased defence spending. As part of this effort, the European Commission launched consultations with defence industry stakeholders to identify regulatory obstacles hindering investment in the defence sector. The Defence Readiness Omnibus ("Omnibus") is the outcome of that process and contains proposals to align EU legislation with the aim of improving defence readiness, defined as the ability of the EU and its defence industry to anticipate, prevent and respond to defence-related crises.1 The initiative is of particular importance to companies in the defence sector and has the aim of further integrating the EU defence market.
Updating the defence rulebook
For defence contractors, the most important proposals are those relating to the 2009 Directives on Defence Procurement and Intra-EU Defence Transfers, which harmonise relevant Member State laws for defence-related products, involving equipment, software and technology specially designed for military use as featured in the EU Common Military List.2 Noteworthy is also the Commission's proposal to amend the rules governing the European Defence Fund ("EDF"). We highlight the key proposals in relation to the EU's defence rulebook below.
Defence Procurement Directive
Whereas a complete revision of the Defence Procurement Directive (Directive 2009/81/EC) is set for 2026, the Commission proposes fast-tracking certain amendments.3 This would involve increasing the application thresholds under the Directive to exempt smaller scale contracts from EU procurement requirements. For contracts still falling under the scope, Member States would be required to offer a new range of procedures, which were previously available only for civil procurement.
Another notable proposed change is that for certain procurements involving a negotiated procedure without publication of a contract notice (direct award), the Commission proposes "Buy European" clauses, which restrict bidding to entities established in the EU and not subject to third country control. These conditions would apply to direct awards for follow-on procurement from EDF projects and common procurement of military equipment concluded prior to 1 January 2031 by at least three Member States.
Intra-EU Defence Transfers Directive
The Commission also proposes amending the Intra-EU Defence Transfers Directive (Directive 2009/43/EC), governing intra-EU trade in defence-related products. Because this topic is largely determined at Member State level, companies must apply for licenses to carry out intra-EU transfers of defence-related products. Therefore, to pave the way for increased joint procurement and industrial collaboration across Member State borders, industry has called for further harmonisation, especially for transfers in the context of EU-funded projects.
The Omnibus proposes letting Member States waive licence requirements for certain intra-EU transfers, including when they are related to EU defence industrial programmes (such as the EDF) and transfers to Member States' armed forces. The availability of General Transfer Licenses, which authorise transfers without the need for prior approval but subject to registration and reporting, would be expanded, including to transfers related to EDF-projects and transfers by certified defence enterprises.4
European Defence Fund
The Omnibus proposes amending the EDF Regulation (Regulation 2021/697), in line with the recommendations resulting from the EDF's interim evaluation.5 Learning from past lessons, the Commission proposes equalising the award criteria for research and development actions6 and explicitly allowing direct awards of funding.7 To avoid delays resulting from co-financing Member States demanding access to intellectual property resulting from development projects, Member States would receive such rights by default, "on fair terms". Funding bonuses for SME participation would also become stricter, whilst companies can get reimbursement for testing in third countries like Ukraine; these changes would apply retroactively, from 1 January 2025.
Removing regulatory barriers
Environmental and Chemicals Legislation
The Omnibus includes proposed defence-related amendments to the REACH Regulation (Regulation 1907/2006/EC), the CLP Regulation (Regulation 1272/2008 in relation to classification, labelling, and packaging of chemical substances and mixtures) and the Biocidal Products Regulation (Regulation 528/2012/EC). Although these regulations already enable Member States to exempt specific substances from their requirements where necessary for defence, the Commission has highlighted that Member States are reluctant to do so. By allowing broader exemptions, the Commission wishes to encourage Member States to make better use of them to speed up defence production. New exemptions are also proposed for Regulation 2019/1021 on persistent organic pollutants.
The Omnibus includes a (non-binding) notice on the interpretation of the sustainable finance framework and the Corporate Sustainability Due Diligence Directive as they relate to the defence industry.8 In essence, this notice clarifies that the EU's sustainable finance framework is compatible with investing in the defence sector and that the framework does not impose any specific limitations on the financing of this sector.
Faster Permitting
To speed up investments ramping up defence production capacity, the Omnibus proposes a new EU regulation to fast-track permitting for defence readiness projects.9 It would broadly cover any set of activities, investments and measures aiming to enhance defence readiness, including through the development of the defence industry. Drawing on similar measures for strategic raw materials and semiconductor projects, the new regulation would, for example, require a single point of contact, provide for administrative support, and set a time limit of 60 days (subject to exceptions) for permitting procedures related to defence readiness projects.
Competition Policy and Financing
In the Omnibus materials, the Commission also clarifies that the EU's competition rules (including on merger control, antitrust and state aid) are important and apply to defence, but should not be an impediment to defence initiatives. This is especially important with respect to state aid, for which the Commission confirms that certain disciplines may not apply because of essential security interests.
Underscoring that both public and private investment will be important to ramp up the EU's defence capabilities, the Omnibus also highlights that InvestEU eligibility criteria for the defence sector should be streamlined based on specific financial instruments, whilst maintaining necessary safeguards.
Next steps
Turning the legislative proposals included in the Defence Readiness Omnibus into law requires adoption by both the European Parliament by a majority vote, and by Member State representatives in the Council by a qualified majority vote. Within the Parliament, the proposals have yet to be assigned to the relevant committees, whereas in the Council, the Defence Industry Working Party is expected to host negotiations at the technical level.
The Commission has called for quick agreement on the Omnibus and the EU defence industry is expected to support the initiative, but its broad scope and the sensitivity of certain proposals are expected to generate opposition from some Member States. For defence companies, it will be key to assess the impact of the proposed changes, some of which are designed to have retroactive effect, and to identify opportunities.
1 See Communication from the Commission to the European Parliament and the Council on the Defence Readiness Omnibus (17 June 2025), available here.
2 Common Military List of the European Union, latest version available here.
3 Proposal for a Directive of the European Parliament and of the Council amending Directives 2009/43/EC and 2009/81/EC, as regards the simplification of intra-EU transfers of defence-related products and the simplification of security and defence procurement (17 June 2025) available here.
4 Until now, transfers to (but not from) such entities have been facilitated. The list of certified defence enterprises is available here.
5 Proposal for a Regulation of the European Parliament and of the Council amending Regulations (EC) No 1907/2006, (EC) No 1272/2008, (EU) No 528/2012, (EU) 2019/1021 and (EU) 2021/697 as regards defence readiness and facilitating defence investments and conditions for defence industry, available here. The interim evaluation report containing detailed findings on EDF implementation is available here.
6 This change would prevent challenges against the classification of a research or development project from impacting the validity of the award decision. See Case T 617/22, Safran v Commission, EU:T:2024:629, available here.
7 This change would ratify the European Commission's controversial decision to include in the 2023 Work Programme (and award direct funding to) a project for which another consortium has already received funding.
8 Commission Notice on the application of the sustainable finance framework and the Corporate Sustainability Due Diligence Directive to the defence sector (18 June 2025), available here.
9 Proposal for a Regulation of the European Parliament and of the Council on the acceleration of permit-granting for defence readiness projects (17 June 2025), available here.
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