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War deregulation of the EU: the Defence Readiness Omnibus package adopted to facilitate defence investments

Łukasz Maślanka

On 17 June, the European Commission published the Defence Readiness Omnibus package, announced earlier in the White Paper on the Future of European Defence (see ‘The White Paper: the EU's new initiatives for European defence’). The package aims to streamline procedures related to defence investment. It consists of a joint communication accompanied by draft amendments to existing regulations and directives, as well as a proposal for a new regulation to accelerate the permitting process for projects linked to defence readiness. The latter introduces a 60-day deadline for the issuance of national permits for defence-related projects. In addition, the Commission seeks to amend the functioning of the European Defence Fund (EDF), simplifying reporting requirements (replacing annual work programmes with multiannual ones), adjusting project selection criteria, and extending the fund to include cooperation with Ukraine. EDF projects will also be subject to protectionist criteria, under which no more than 35% of component value may originate from outside the EU – mirroring the approach taken in SAFE and EDIP. The new provisions would also introduce ‘defence readiness’ as grounds for exempting certain projects from environmental, climate, chemical, and equality-related regulations (the so-called ESG criteria). Transfers of technology, as well as arms and military equipment (AME), would also be facilitated within the EU. Member states would find it easier to conduct joint procurement of AME, while the threshold for exemption from public procurement rules would rise from €443,000 to €990,000. Most of the proposed measures will require approval from both the Council of the EU and the European Parliament under the ordinary legislative procedure.

The Defence Readiness Omnibus represents a significant step towards accelerating defence investments within the EU and enhancing the overall cost-effectiveness of AME production within the EU. However, the effective implementation of the package will depend on political will not only at the EU institutional level but also among member states, due to the discretionary nature of certain provisions and the requirement to transpose directives into national law.

Commentary

  • The Commission aims to compel EU member states to address the most pressing issues, notably the protracted permitting procedures for defence production and related projects. To this end, it has opted to shorten deadlines by means of a regulation – a legal act of general application that does not require transposition into national law. However, certain exceptions have been envisaged, allowing the procedure to be extended to three or even four months. At the same time, the EU wants each member state to establish a single point of contact responsible for coordinating the permitting process. This may require legislative initiatives at the national level.
  • In addition to simplifying and accelerating procedures, the Commission continues to prioritise cooperation between member states and EU-based companies. Its long-term objective is to establish a common market for defence products. The proposed amendments to the directive on defence and security procurement address relatively uncontroversial issues, such as doubling the permissible value of purchases carried out without tender procedures. The Commission is therefore focusing more on removing barriers to internal EU trade than on introducing protectionist measures targeting third countries, which remain a source of concern for certain member states and partners. Nonetheless, there are fears that future attempts to revise the directive could gradually restrict the ability of EU members to procure AME produced outside the EU.
  • The changes to the EDF may improve access to funding for companies and institutions from countries that have so far made limited use of the programme, including Poland. This will be supported by the simplification of eligibility criteria – albeit with a stronger emphasis on reducing reliance on external suppliers – enhanced cooperation with research centres (through so-called pre-commercial procurement), improved access to research outcomes for co-financing states, and the option for the EU to fund tests conducted outside its own territory, including in Ukraine. However, the Commission has also used the procedural simplifications to expand its discretion in project selection – justified by the need to respond to defence requirements – and to enhance the role of so-called indirect project management by the European Defence Agency (EDA). One important issue not addressed in the package, concerns the level of national co-financing required for projects, particularly those led by research institutions.