The European Union is taking decisive steps to strengthen its defense sector and ensure long-term security and resilience. This briefing summarizes key takeaways from the recently published Defense Readiness Omnibus package.
The Defense Readiness Omnibus
The "Defense Readiness Omnibus" is a proposal published by the European Commission ("Commission") on 17 June 2025. It aims to address legal and administrative obstacles which the defense industry currently faces and which slow down a speedy ramp-up of defense capabilities in the EU. The proposal is in line with the European Union's wider White Paper for European Defense-Readiness 2030, builds on the European Defense Industrial Strategy and specifically responds to the European Council’s request from earlier this year to simplify the legal and administrative framework in the EU.
As an omnibus bill, the Defense Readiness Omnibus is not one single legislative act. It actually consists of different measures, all published together:
- A Communication by the Commission setting out the rationale behind the Defense Readiness Omnibus;
- A Commission Notice specifically on the sustainable finance framework; and
- Seven proposals for new regulations, directives or delegated regulations to address specific legal and administrative hurdles.
We set out the key takeaways from this package below.
The Defense Readiness Omnibus is currently still just a draft and the legislative proposals need to undergo the EU's rulemaking process before they become binding laws. Even then, further implementation may be required in EU Member States. The Commission has already begun this process by submitting the proposals to the European Parliament and the European Council ("Council"). Timing is difficult to predict, but depending on the amount of changes both the European Parliament and the Council would like to introduce, the legislative process could take more than one year. However, the Commission has encouraged its co-legislators to move quickly and to exert necessary restraint in the review process. This does not apply to the communication and notice issued by the Commission, because those are interpretative guidelines (only). We therefore expect that EU Member States and national authorities may begin to align their administrative practices with these new guidelines shortly.
As the Defense Readiness Omnibus is still evolving, it will be important to track developments in the near future.
Intra-EU Transfer of Defense Products & Non-Defense Horizontal Legislation
Intra-EU Transfer of Defense Products
The Defense Readiness Omnibus aims to tackle fragmentation and bureaucracy under the current framework (Directive 2009/43/EC), primarily caused by inconsistent national implementation, leading to fragmented requirements, slow procedures, and unnecessary administrative burdens across EU Member States. Furthermore, existing simplifications, especially exemptions and General Transfer Licenses ("GTLs"), which could accelerate transfers, are not fully leveraged, resulting in continued inefficiencies. Also, the existing licensing framework does not adequately accommodate collaborative EU defense initiatives, such as those funded by the European Defense Fund or PESCO.
- The Defense Readiness Omnibus aims to broaden and standardize exemptions from prior authorization for specific categories of defense products, reducing red tape and ensuring more predictable, uniform rules across the EU. The package proposes to make GTLs more robust and harmonized, with clearer conditions and broader applicability, enabling the industry to rely on them for routine and repeated transfers. New, tailored GTLs are proposed specifically for projects under the European Defense Fund and PESCO, facilitating the seamless movement of components and systems within multinational industrial consortia.
- The Commission will clarify certain non-essential elements of the current framework through delegated acts, providing greater legal certainty and consistency for industry and EU Member States. The Defense Readiness Omnibus also foresees an adjustment of supplier information rules for greater flexibility while maintaining transparency and control.
Horizontal Regulatory Issues
- Defense activities are often delayed or complicated by overlapping civilian regulations, particularly in environmental, product safety, and chemicals law.
- The Commission is encouraging EU Member States to implement fast-track and priority-rated permitting processes for defense industrial investments and readiness activities, including a single point of contact and streamlined procedures.
- The Defense Readiness Omnibus clarifies and promotes the use of existing derogations in EU law (such as “overriding public interest,” “public safety,” or “crisis”) to enable more flexible and timely authorizations for defense projects.
- Efforts are being made to ensure that military-specific exemptions under regulations like REACH (dealing with chemicals) are applied more consistently and broadly, reducing unnecessary compliance burdens for defense activities.
- EU Member States are also encouraged to fully utilize the possibility to suspend import duties on certain weapons, equipment, and raw materials imported for defense purposes, supporting the EU’s defense industrial base.
Streamlining Public Procurement
With EU Member States being the largest (and often only) customers for defense products, an efficient public procurement regime is key to ramping up defense production in the EU. The Defense Readiness Omnibus includes a proposal to amend the existing Defense Procurement Directive 2009/81/EC. If the proposal passes the ongoing legislative process on the EU level (see above 1), it would then need to be implemented into the national laws of EU Member States, who will need to amend their respective national procurement laws accordingly.
The proposal of the Defense Readiness Omnibus includes the following:
- Higher thresholds: Thresholds for EU procurement rules will be increased to EUR 900,000 for supply and service contracts, as well as EUR 7,000,000 for works contracts. This will allow EU Member States to apply more flexible national procurement rules below these thresholds – but the impact will depend on national procurement laws already in place.
- More flexibility: Contracting authorities will have more procedural flexibility and will be able to use innovation partnerships, open procedures and dynamic purchasing systems.
- Longer framework agreements: Framework agreements with suppliers may be extended from a maximum of seven to now ten years, providing contractors with more certainty and reducing the need to conduct tenders.
- Easier direct procurement: Direct procurement (i.e., without a tender) of the results of R&D projects will be easier. This will help close a financing gap for companies transitioning from R&D funded projects to commercial production of products.
- More joint purchases: Joint purchases between at least three EU Member States will become easier (with a sunset date of 1 January 2031).
- Broader exemptions: Already existing “national security” exemptions, which allow deviations from applicable EU procurement rules, are clarified to also apply to all tenders aimed at improving the EU's / NATO's defense readiness.
One development to note is that the Defense Readiness Omnibus does not heavily rely on "buy European" requirements. EU government tenders in the defense sector continue to be open to third country bidders, though recent decisions of the European Court of Justice have generally made it easier for third-country bidders to be excluded from government tenders (see our blog on this topic here). Nevertheless, some of the privileges described above will only be available to contractors (and subcontractors) established in the EU, the EEA or the Ukraine. In addition, the contractors (and subcontractors) may not be subject to control by a third country or by a third-country entity. The details, especially what "control" means in this context, will need to be further clarified in the legislative process.
Sustainable Finance and the Defense Sector
The Defense Readiness Omnibus includes a dedicated "Notice" on how the EU sustainable finance framework and the Corporate Sustainability Due Diligence Directive (CSDDD) apply to the defense sector. It aims to prevent undue discrimination against the defense sector in investment decisions and to clarify the sector’s potential contribution to social sustainability and EU resilience. This development follows the previously released Sustainability Omnibus, which aims at generally reducing ESG related burdens for EU companies (see our coverage here and here). The defense industry is recognized as contributing to EU and UN policy goals, particularly in relation to peace, security, and social sustainability. The sector is essential for EU defense readiness, resilience, and the protection of citizens, especially in light of current geopolitical threats.
- No sectoral exclusion for defense industry: The EU sustainable finance framework does not exclude the defense sector from access to finance or investment. Defense companies are treated like in any other sector with sustainability disclosure requirements. Only activities involving “controversial weapons” (anti-personnel mines, cluster munitions, chemical and biological weapons) are subject to additional disclosure and exclusion requirements. There is a lack of clarity regarding nuclear weapons.
- Case-by-case assessment and no revenue thresholds: There are no prescribed revenue thresholds or blanket exclusions for defense-related activities. Investment decisions and sustainability assessments should be made on a case-by-case basis, considering compliance with relevant laws, treaties, and risk mitigation processes.
- Defense industry’s contribution to social sustainability: The EU recognizes the defense industry as an important contributor to the EU’s resilience, security, and peace, and therefore to social sustainability. Financial market participants may consider defense activities that safeguard peace and security as contributing to social objectives, provided they do not significantly harm other sustainability goals and follow good governance practices. There is no automatic assumption that defense activities are socially harmful.
- Risk mitigation and regulatory controls: The defense sector is highly regulated, especially regarding the use and export of military and dual-use items. There are strict EU and international controls, including export licensing and compliance measures. Those controls are relevant for meeting due diligence and sustainability requirements under EU law.
- Alignment with international standards: Defense companies are expected to align with international standards such as the UN Global Compact and OECD Guidelines for Multinational Enterprises. Due diligence and compliance with export controls are supporting those standards and are the minimum safeguards required under the EU Taxonomy Regulation.
- Transparency and benchmarking: Only companies involved in prohibited weapons are explicitly excluded from sustainability benchmarks. The framework promotes transparency and reliability of sustainability-related benchmarks without excluding the defense sector.
- Reporting and disclosure provisions: The Corporate Sustainability Reporting Directive and the Corporate Sustainability Due Diligence Directive apply to the defense sector like any other, but allow for the omission of sensitive or classified information. The Corporate Sustainability Due Diligence Directive excludes due diligence obligations for downstream activities related to military and dual-use products once export is authorized.
Adaptation of Competition Rules to the Defense Readiness Strategy
In its Defense Readiness Omnibus Communication, the Commission clarifies the application of competition and State aid rules to the defense sector.
- Application to the defense sector: Without prejudice to Article 346 TFEU, competition law applies to the defense industry. However, the Commission commits to give due consideration to the “specificities” of the industry when enforcing competition rules. The document does not provide detailed practical guidance but gives the direction of travel in terms of enforcement for each area of competition law, i.e. merger control, antitrust and State aid. In doing so, the Commission has sent clear signals of a favorable policy landscape for investments, consolidations and cooperation that contribute to the defense readiness objective.
- Merger control: The Commission is expected to reflect the new security and defense environment in its updated guidelines on merger control. In practice, we see a favorable policy environment for clearing complex M&A deals that contribute to the defense readiness objective. In particular, the Commission may be more open to policy considerations and give more weight to defense related efficiencies arguments when reviewing these deals. Member States may also be inclined to invoke the defense exception under Article 346 TFEU and instruct companies to carve out from EU notifications the exclusively military aspects of M&A deals. The Commission and any Member State can refer the case before EU courts if it considers that a Member State is making an improper use of the defense exception.
- Antitrust: The Commission shows openness to defense related cooperation between competitors, including in the form of joint production of defense products or joint procurement of raw materials. As it did during the Covid-19 crisis and at the start of the war in Ukraine, the Commission stands ready to provide guidance to businesses on specific joint initiatives in order to increase legal certainty. In that context, it commits to consider efficiencies in terms of defense readiness and supply chain resilience.
- State aid: The Commission highlighted several facilitations for public funding to the defense industry:
- funding for activities within the public remit (such as aid to general infrastructure or to the armed forces) does not constitute State aid and therefore does not need to go through the notification and clearance process;
- Member States can rely on the defense exception under Article 346 TFEU to disapply State aid rules when granting aid for developing military goods to protect their essential security interests. The Commission confirmed the availability of this exception in the current context. However, in practice, navigating this exception is not easy. In particular, (i) only listed military products are in scope, (ii) the situation of dual use products is not straightforward, and (iii) strict necessity and proportionality requirements apply. Therefore, a case-by-case assessment is required.
- State aid measures outside the scope of Article 346 TFEU will generally need to be notified to the Commission, unless exempted. The Commission confirmed its readiness to greenlight such State aid and committed to prioritize the review of defense related State aid notifications. Positive factors for the assessment include alignment with EU programs, contribution to resilience, reduction of third-country dependencies and some cross border cooperation.
