Council Regulation (EU) 2025/1106 of 27 May 2025 establishing the Security Action for Europe (SAFE) through the Reinforcement of the European Defence Industry Instrument (Text with EEA relevance)

• CELEX: Regulation (EU) 2025/1106
• Articles: 24

Article 1 Subject matter and scope

This Regulation establishes the Security Action For Europe (SAFE) through the Reinforcement of the European Defence Industry Instrument (the ‘SAFE instrument’) providing financial assistance to Member States, enabling them to carry out urgent and major public investments in support of the European defence industry in response to the current crisis situation.

This Regulation sets out the conditions and procedures for the provision to, and implementation by, Member States of the financial assistance under the SAFE instrument, and 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:

(a)

category one: ammunition and missiles; artillery systems, including deep precision strike capabilities; ground combat capabilities and their support systems, including soldier equipment and infantry weapons; small drones (NATO class 1) and related anti-drone systems; critical infrastructure protection; cyber; and military mobility including counter-mobility;

(b)

category two: air and missile defence systems; maritime surface and underwater capabilities; drones other than small drones (NATO class 2 and 3) and related anti-drone systems; strategic enablers such as, but not limited to, strategic airlift, air-to-air refuelling, C4ISTAR systems as well as space assets and services; space assets protection; artificial intelligence and electronic warfare.

Article 2 Definitions

For the purposes of this Regulation, the following definitions apply:

(1)

‘defence product’ means goods, services and works that fall within the scope of Directive 2009/81/EC, as set out in Article 2 thereof;

(2)

‘other products for defence purposes’ means any good, service and work other than those falling within the scope of Directive 2009/81/EC, as set out in Article 2 thereof, which are necessary for or aimed at defence purposes;

(3)

‘common procurement’ means the procurement procedure of defence products or other products for defence purpose and the resulting contracts, carried out by at least one Member State receiving financial assistance under the SAFE instrument and one additional Member State or one Member of the European Free Trade Association which are members of the European Economic Area (‘EEA EFTA States’) or Ukraine. In addition, the common procurement may include acceding countries, candidate countries and potential candidates, and other third countries with whom the Union has entered a Security and Defence Partnership (Non-Binding Instrument, NBI). Common procurement may include existing procurement contracts which fulfil the same conditions.

Article 3 Complementary nature of the SAFE instrument

The SAFE instrument shall complement the measures taken by the Union as well as by Member States to carry out urgent and major public investments to support the European defence industry.

Article 4 Conditions for using the SAFE instrument

1.   A Member State may request financial assistance under the SAFE instrument (‘financial assistance’) for activities, expenditures and measures aimed at addressing the crisis situation referred to in Article 1. Those activities, expenditures and measures shall be related to defence products or other products for defence purposes and carried out through common procurements conducted in accordance with the eligibility rules set out in Article 16 and shall aim to:

(a)

speed up 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;

(b)

improve 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; or

(c)

ensure interoperability and interchangeability across the Union.

2.   A Member State may use financial assistance under the SAFE instrument in synergy with Union programmes in accordance with the rules of those programmes. Financial assistance under the SAFE instrument may also be used to finance activities which have received a Union contribution under a Union programme.

3.   By derogation from paragraph 1 of this Article, procurements carried out by one Member State shall be eligible for support under the SAFE instrument where a procurement contract was signed no later than 30 May 2026. Where a Member State includes such a procurement in the plan referred to in Article 7(2), it shall actively take all necessary steps to extend the benefit of the contract concerned to at least one additional Member State, one EEA EFTA State, or Ukraine, in addition to any interested acceding country, candidate country, potential candidate, or other third country with which the Union has entered a Security and Defence Partnership. Eligibility conditions established in Article 16(2) to (14) shall apply mutatis mutandis .

Article 5 Form of the financial assistance

The financial assistance shall take the form of a loan granted by the Union to the Member State concerned.

Article 6 Maximum amount of financial assistance

The maximum amount of financial assistance in the form of loans provided under the SAFE instrument shall be EUR 150 000 000 000.

Article 7 Request for financial assistance and European defence industry investment plans

1.   A Member State wishing to receive financial assistance under the SAFE instrument shall send a request to that effect to the Commission by 30 November 2025. The request shall be accompanied by a European defence industry investment plan (the ‘plan’).

2.   The plan shall be duly reasoned and substantiated. It shall set out the following elements:

(a)

a description of the defence product and of the other products for defence purposes;

(b)

a description of the planned activities, estimated expenditures and measures in accordance with Article 4;

(c)

where relevant, the description of the foreseen involvement of Ukraine in the planned activities, expenditures and measures, or of foreseen actions for the benefit of Ukraine;

(d)

a description of the planned measures aimed at ensuring compliance with Article 16 and procurement rules, including a description of how that compliance is to be ensured.

3.   Where relevant, Member States shall include a description of activities to strengthen security of supply and resilience, in particular by facilitating access to the defence market for SMEs, mid-caps and new defence players.

4.   When preparing their plans, Member States may request the Commission to organise an exchange of good practices and, where appropriate, seek synergies with defence industry investment plans of other Member States in order to allow the requesting Member States to benefit from the experience of other Member States.

5.   Member States may submit to the Commission an amended request for financial assistance accompanied by an amended plan when duly justified by a change of the planned expenditure or measures and subject to the availability of loan amounts.

Article 8 Decision on the request for financial assistance

1.   The Commission shall assess the request for financial assistance accompanied by the plan without undue delay.

2.   Where the Commission finds that the request fulfils the conditions laid down in this Regulation, in particular those provided for in Article 4, Article 7(2) and Article 16, the Commission shall submit a proposal for a Council implementing decision making the financial assistance available.

3.   The Council implementing decision referred to in paragraph 2 shall contain:

(a)

confirmation that the request referred to in Article 7(1) complies with the conditions laid down in this Regulation; and

(b)

the amount of the loan and the amount of the loan support to be paid in the form of pre-financing in accordance with Article 11.

4.   The Commission shall, in all cases, communicate its assessment of the request to the Member State concerned, providing it with reasons for its assessment.

5.   When submitting the proposal to the Council in accordance with paragraph 2, the Commission shall consider existing and expected financing needs of the requesting Member State, as well as requests for financial assistance pursuant to this Regulation already submitted or planned to be submitted by other Member States, while applying the principles of equal treatment, solidarity, proportionality and transparency. That proposal shall be submitted without undue delay.

6.   The Council shall adopt the implementing decision referred to in paragraph 2, as a rule, within four weeks of the adoption of the Commission’s proposal.

7.   Where, following the adoption of the implementing decision pursuant to paragraph 2, amounts remain available for financial assistance under the SAFE instrument, the Commission may publish a new call for expressions of interest by 31 December 2026. In such a case, the procedure set out in Article 7 and in paragraphs 1 to 5 of this Article shall apply mutatis mutandis .

8.   Any implementing decision pursuant to paragraph 2 shall be adopted by 30 June 2027.

Article 9 Borrowing and lending operations

1.   In order to finance support under the SAFE instrument in the form of loans, the Commission shall be empowered, on behalf of the Union, to borrow the necessary funds on the capital markets or from financial institutions in accordance with Article 224 of Regulation (EU, Euratom) 2024/2509 (the ‘Financial Regulation’).

2.   The borrowing and lending operations under the SAFE instrument shall be carried out in euros.

Article 10 Loan agreement and operational arrangements

1.   Upon adoption of a Council implementing decision referred to in Article 8(2), the Commission shall enter into a loan agreement and operational arrangements with the requesting Member State.

2.   The loan agreement shall lay down the availability period and the detailed terms of the support under the SAFE instrument in the form of loans. The loan agreement shall have a maximum duration of 45 years. In addition to the elements laid down in Article 223(4) of the Financial Regulation, the loan agreement shall contain the amount of pre-financing and rules on clearing of pre-financing.

3.   The operational arrangements shall set out the relationship between the implementation of a plan and the corresponding financial assistance, including a tentative schedule of disbursement of the loan instalments, with yearly ceilings as appropriate. In addition, these operational arrangements shall set out types of documentary evidence and control rules related to the fulfilment of the specific eligibility rules applied by the Member States in accordance with Article 16, and the detailed elements referred to in Article 14.

Article 11 Pre-financing

1.   Member States may request, as part of their plan, a pre-financing payment of an amount of up to 15 % of the loan support.

2.   The disbursement of pre-financing shall be subject to the entry into force of the loan agreement referred to in Article 10(2). The loan agreement may provide that payment of pre-financing is conditional upon the conclusion of the operational arrangements referred to in Article 10(3).

3.   The payments shall be made subject to the availability of funding. The pre-financing may be disbursed in one or more tranches.

Article 12 Rules on payments of instalments and suspension of loans

1.   The period of availability of the loan, which corresponds to the period during which payments to the Member State concerned may be approved under this Article, shall end on 31 December 2030. Payments shall be made in instalments, subject to the availability of funding. An instalment may be disbursed in one or more tranches.

2.   The Member State concerned may submit to the Commission a duly justified request for payment. Such a request for payment may be submitted by the Member State concerned to the Commission twice a year. The Member State shall provide the justification underpinning the payment request with evidence of progress in fulfilling the plan.

3.   The Commission shall assess the completeness, correctness and coherence of the request for payment referred to in paragraph 2 without undue delay, and at the latest within two months of receiving the request. Where the Commission makes a positive assessment of the fulfilment of the conditions set out in this Regulation, it shall adopt without undue delay a decision authorising the disbursement of the loan instalment.

4.   Where, as a result of the assessment referred to in paragraph 3, the Commission concludes that the request for payment referred to in paragraph 2 is unsatisfactory, the payment of all or part of the loan shall be suspended. The Member State concerned may present its observations within one month of the communication of the Commission’s assessment.

5.   The Commission shall assess the observations referred to in paragraph 4 without undue delay. It shall lift the suspension where the Member State concerned has demonstrated that it has taken the necessary measures to ensure the satisfactory fulfilment of the conditions set out in this Regulation.

Article 13 Prudential rules applicable to the portfolio of loans

The share of loans granted to the three Member States representing the largest share of the loans granted shall not exceed 60 % of the maximum amount referred to in Article 6.

Article 14 Control and audits

The loan agreement shall contain the necessary provisions regarding controls and audits as required by Article 223(4) of the Financial Regulation.

Article 15 Reporting

1.   The Commission shall provide the European Parliament and the Council with an annual report on the use of financial assistance.

2.   Where appropriate, the report shall be accompanied by a proposal for the extension of the period of availability of the SAFE instrument.

Article 16 Eligibility rules on common procurement supporting defence industry investments

1.   Common procurements shall only be eligible for support under the SAFE instrument if they comply with the eligibility conditions set out in this Article.

2.   Common procurement procedures and contracts of defence products shall include the participation requirements for contractors and subcontractors involved in the common procurement set out in paragraphs 3 to 13 and 15 of this Article, without prejudice to any conditions set out in the agreements referred to in Article 17.

3.   Contractors and subcontractors involved in the common procurement shall be established and have their executive management structures in the Union, in an EEA EFTA State or in Ukraine. They shall not be subject to control by a third country which is not an EEA EFTA State or Ukraine or by another third-country entity which is not established in the Union, in an EEA EFTA State or in Ukraine.

4.   By way of derogation from paragraph 3, in order to take into account industrial cooperation with non-EU partners, common procurements that involve a subcontractor which is allocated between 15 % and 35 % of the value of the contract, and that is not established or doesn’t have its executive management structures in the Union, EEA EFTA State or Ukraine, shall be eligible for support under the SAFE instrument providing that at least one of the following conditions are met:

(a)

a direct contractual relationship related to the defence product has been established between the contractor and that subcontractor prior to the date of entry into force of this Regulation;

(b)

the contractor commits to studying, within two years, the feasibility of replacing the input provided by that subcontractor with an alternative, restriction-free input originating in the Union, EEA EFTA States or Ukraine, and meeting technical and time requirements.

5.   By way of derogation from paragraph 3, a legal entity established in the Union and controlled by another third country or by another third-country entity may participate in the common procurement if it has been subject to screening within the meaning of Regulation (EU) 2019/452 and, where necessary, to appropriate mitigation measures, or if it provides guarantees verified by the Member State in which the contractor or subcontractor involved in the common procurement is established. The guarantees shall provide assurances that the involvement of the contractor or subcontractor in the common procurement does not contravene the security and defence interests of the Union and its Member States as established in the framework of the common foreign and security policy pursuant to Title V of the Treaty on European Union.

6.   The guarantees referred to in paragraph 5 may be based on a standardised template provided by the Commission and shall be part of the tender specifications, in order to ensure a harmonised approach throughout the Union. The guarantees shall, in particular, substantiate that, for the purposes of the common procurement, measures are in place to ensure that:

(a)

control over the contractor or subcontractor involved in the common procurement is not exercised in a manner that restrains or restricts its ability to fulfil the order and to deliver results; and

(b)

access by a third country or by a third-country entity to classified information relating to the common procurement is prevented and the employees or other persons involved in the common procurement have a national security clearance issued by a Member State in accordance with national laws and regulations.

7.   The contracting authority conducting the common procurement shall provide the Commission with a notification on the mitigation measures applied within the meaning of Regulation (EU) 2019/452 or the guarantees referred to in paragraph 5. Further information on the mitigation measures applied or the guarantees shall be made available to the Commission at its request.

8.   The infrastructure, facilities, assets and resources of the contractors and subcontractors involved in the common procurement which are used for the purposes of the common procurement shall be located in the territory of a Member State, an EEA EFTA State, or Ukraine. Where contractors or subcontractors involved in the common procurement have no readily available alternatives or relevant infrastructure, facilities, assets and resources in the territory of a Member State, an EEA EFTA State, or Ukraine, they may use their infrastructure, facilities, assets and resources which are located or held outside those territories, provided that such use does not contravene the security and defence interests of the Union and its Member States.

9.   The contractors and subcontractors involved in the common procurement may be considered to fulfil the eligibility conditions referred to in paragraphs 3 to 7 where they have fulfilled equivalent conditions under Regulations (EU) 2018/1092  ( 9 ) , (EU) 2021/697  ( 10 ) , (EU) 2023/1525 or (EU) 2023/2418 of the European Parliament and of the Council and provided that no subsequent changes call into question the fulfilment of those conditions.

10.   The cost of components originating outside the Union, EEA EFTA States and Ukraine shall not be higher than 35 % of the estimated cost of the components of the end product. For the purpose of procurements supported by the SAFE instrument, no component shall be sourced from a third country that contravenes the security and defence interests of the Union and its Member States.

11.   For defence products related to category two as referred to in Article 1, second subparagraph, point (b), contractors shall have the ability to decide, without restrictions imposed by third countries or by third-country entities, on the definition, adaptation and evolution of the design of the defence product procured, including the legal authority to substitute or remove components that are subject to restrictions imposed by third countries or by third-country entities.

12.   For the purposes of this Article, ‘subcontractors involved in the common procurement’ means any legal entity which provides critical inputs that possess unique attributes essential for the functioning of a product, which is allocated at least 15 % of the value of the contract, and which needs access to classified information for the performance of the contract.

13.   Member States shall ensure that the procurement procedures and contracts for other products for defence purpose resulting from the common procurement receiving support under the SAFE instrument contain appropriate eligibility conditions to protect the security and defence interests of the Union and its Member States.

14.   Member States shall detail, in the plan referred to in Article 7, eligibility conditions in line with paragraphs 3 to 11 and 13 to 15 of this Article, without prejudice to any conditions set out in the agreements referred to in Article 17. Financial assistance shall be conditional upon presentation, alongside the request for payment, of the information indicated in the operational arrangements referred to in Article 10.

15.   Member States may use the financial assistance provided under the SAFE instrument to finance their participation in procurement procedures carried out in accordance with Article 168(2) or (3) of the Financial Regulation. In that case, by way of derogation from Article 168(2) and (3) of the Financial Regulation, third countries participating in the common procurement may also participate in and benefit from any procurement mechanisms set out in Article 168(2) and (3) of the Financial Regulation.

Article 17 Conditions for the participation of other third countries entities and products

1.   The Union may conclude bilateral or multilateral agreements with acceding, potential candidate and candidate countries other than Ukraine and other third countries with which the Union has entered into a Security and Defence Partnership (NBI) in order to open the eligibility conditions referred to in Article 16 to those countries and their territories, in accordance with paragraphs 2 and 3 of this Article.

2.   The bilateral or multilateral agreement referred to in paragraph 1 shall specify how the eligibility conditions referred to in Article 16 are to be applied. It shall lay down, in particular:

(a)

the conditions and modalities of participation of contractors and subcontractors established in the third country in the common procurement under the SAFE instrument, including the conditions on the location of the executive management structures and on control by third countries or third-country entities;

(b)

the rules related to the location of the infrastructure, facilities, assets and resources of the contractors or subcontractors involved in the common procurement which are used for production of defence products or other products for defence purposes supplied under the contracts resulting from common procurements under the SAFE instrument;

(c)

the rules related to the cost of components originating in the third country, including a minimum share of components originating either in the Union, an EEA EFTA country or Ukraine and a maximum share of components originating neither in the Union, an EEA EFTA country or Ukraine or third-country party to the agreement;

(d)

the rules related to restrictions imposed by third countries that are not parties to the agreement or by entities established on their territory, on the definition, adaptation and evolution of the design of the defence product procured with the support of the SAFE instrument.

3.   The bilateral or multilateral agreement shall:

(a)

ensure a fair balance as regards the contributions and benefits of the third country;

(b)

lay down the conditions of any financial contribution to be provided by the third country to the Union;

(c)

lay down any other appropriate measures governing the security of supply of the procured product;

(d)

contribute to an increase in the standardisation of defence systems and a greater interoperability between Member States’ and those other third countries’ capabilities.

4.   The contributions referred to in paragraph 3, point (b), shall constitute external assigned revenues in accordance with Article 21(5) of the Financial Regulation and shall be used for programmes supporting the Union defence industry, the Ukrainian defence industry and Ukraine in accordance with the rules of those programmes.

Article 18 Modification of framework agreements or contracts

1.   Where a procurement is supported by the SAFE instrument, the rules provided for in paragraphs 2 to 4 shall apply to an existing framework agreement or contract that has as its object the purchase of defence products, is financed by at least one of the participating Member States in full or in part with the loan awarded under the SAFE instrument, and does not provide for the possibility to substantially amend it. When applying paragraphs 2 and 3, the contracting authority that concluded the framework agreement or contract shall obtain the prior agreement of the undertaking with which it has concluded that framework agreement or contract.

2.   A contracting authority of a Member State may modify an existing framework agreement or contract for defence products, where that framework agreement or contract has been concluded with an undertaking complying with criteria equivalent to those laid down in Article 16(3) to (13) of this Regulation, in order to add new contracting authorities from countries participating in the procurement as parties to that framework agreement or contract. Article 29(2), first subparagraph, of Directive 2009/81/EC shall not apply to the contracting authorities not originally party to the framework agreement or contract.

3.   By way of derogation from Article 29(2), third subparagraph, of Directive 2009/81/EC, a contracting authority of a Member State may make substantial amendments to the quantities set out in a framework agreement or contract, with an estimated value above the thresholds laid down in Article 8 of Directive 2009/81/EC, where that framework agreement or contract has been concluded with an undertaking that complies with criteria equivalent to those laid down in Article 16(3) to (13) of this Regulation, and insofar as the modification is strictly necessary for the application of paragraph 2 of this Article.

4.   For the purpose of calculating the value referred to in paragraph 3, the updated value shall be the reference point when the contract includes an indexation clause.

5.   A contracting authority which has modified a framework agreement or contract in the cases referred to in paragraph 2 or 3 of this Article shall publish a notice to that effect in the Official Journal of the European Union in accordance with Article 32 of Directive 2009/81/EC.

6.   In the cases referred to in paragraphs 2 and 3, the principle of equal rights and obligations shall apply between the contracting authorities which are party to the framework agreement or contract, in particular regarding the cost of additional quantities procured.

Article 19 Cases justifying the use of the negotiated procedure without the publication of a contract notice in the context of a procurement supported by the SAFE instrument

Procurements involving at least one Member State receiving financial assistance under the SAFE instrument shall be deemed to satisfy the condition of urgency resulting from a crisis for the purposes of Article 28(1), point (c), of Directive 2009/81/EC.

Article 20 VAT exemption on importation and supply of defence products

1.   For the purposes of this Regulation, the supplies, intra-Community acquisitions and importations of defence products or other products for defence purposes which are made under contracts resulting from procurements supported by the SAFE instrument shall be exempted from the value added tax (VAT) applicable under Directive 2006/112/EC. The exemption shall be with deductibility of the VAT paid at the preceding stage.

2.   The VAT exemption certificate set out in the Annex shall serve to confirm that the transaction qualifies for the VAT exemption under this Regulation. That certificate shall be stamped by the competent authorities of the Member State of the entity acquiring the defence products or other products for defence purposes under contracts resulting from procurements supported by the SAFE instrument and held by the supplier of those products as part of their records.

Article 21 Application of the rules on classified information and sensitive information

1.   The Commission shall use a secured exchange system in order 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.

2.   The Commission shall have access to information, including classified information, strictly necessary for the purpose of verifying the conditions for disbursement of payments and carrying out the checks, reviews, audits, investigations, reports as well as the controls and audits, as referred to in Article 14.

Article 22 Information, communication and publicity

1.   The Commission and the Member States may engage in communication activities to ensure the visibility of the Union with regard to the financial assistance envisaged in the relevant European defence industry investment plans, including through joint communication activities with the national authorities concerned, while duly taking into account security requirements. The Commission may, as appropriate, ensure that support under the SAFE instrument is communicated and acknowledged through a funding statement.

2.   The Member States benefiting from financial assistance under the SAFE instrument shall ensure the visibility of the Union’s financial assistance, while duly taking into account security requirements, including, where applicable, by displaying the emblem of the Union and an appropriate funding statement that reads ‘supported by the European Union – SAFE’, in particular when promoting the common procurements and their results, by providing coherent, effective and proportionate targeted information to multiple audiences, including the media and the public.

3.   The Commission shall implement information and communication actions relating to the SAFE instrument, to actions taken pursuant thereto, and to the results obtained therefrom. The Commission shall, where appropriate, inform the representation offices of the European Parliament of its actions and involve them in those actions.

Article 23 Entry into force

This Regulation shall enter into force on the day following that of its publication in the Official Journal of the European Union .

Schedules & Appendices

ANNEX SAFE INSTRUMENT VAT EXEMPTION CERTIFICATE

ANNEX

SAFE INSTRUMENT VAT EXEMPTION CERTIFICATE

Serial No (optional):

1.

ELIGIBLE ENTITY

Designation/name

Street and number

Postcode, place

Member State of the entity

2.

COMPETENT AUTHORITY RESPONSIBLE FOR STAMPING (name, address and telephone number)

3.

DECLARATION BY THE ELIGIBLE ENTITY

The eligible entity hereby declares that the products set out in box 4 are financed under the SAFE instrument.

The eligible entity hereby undertakes to pay to the Member State in which the place of supply of the defence products or other products for defence purposes acquired is located the VAT which would be due should these products not comply with the conditions of exemption.

Place, date

Name and status of signatory

Signature

4.

DESCRIPTION OF THE PRODUCTS FOR WHICH THE EXEMPTION FROM VAT IS REQUESTED

A.

Information concerning the supplier

(1)

name and address

(2)

Member State

(3)

VAT number or tax reference number

B.

Information concerning the products:

No

Detailed description of the products (or reference to the attached order form)

Quantity or number

Value excluding VAT

Currency

Value per unit

Total value

Total amount

5.

CERTIFICATION BY THE COMPETENT AUTHORITIES OF THE MEMBER STATE OF ACQUISITION

The consignment/supply of products described in box 4 meets the conditions for exemption from VAT.

Place, date

Stamp

Name and status of signatory

Signature