Strengthening EU Readiness: The Defence Omnibus and Economic Security Package in Focus

The European Union is reshaping its regulatory and strategic framework to address a world marked by geopolitical tension and supply chain vulnerabilities. Two recent initiatives stand out in this context: the Defence Readiness Omnibus and the European Economic Security Package. These two initiatives aim at securing Europe’s future by strengthening defence readiness and anticipate strategic risks undermining security.

The Defence Readiness Omnibus

The European Commission unveiled the “Defence Readiness Omnibus” package in June 2025 to remove bottlenecks in public procurement, permitting, reporting obligations, and cross-border cooperation. The initiative builds on the priorities outlined the month before in the White Paper for European Defence-Readiness 2030, which sets out a strategic vision to rearm Europe to ensure that the EU’s defence industry can deliver at the require speed and scale, and to enable the rapid deployment of military troops and assets across the Union.

One of the White Paper’s first areas of focus was regulatory simplification to address capability gaps and better support to the European defence industry, a goal which is directly advanced by the Defence Readiness Omnibus.

The package introduces a range of ambitious simplification measures, not only in defence-specific legislation and programmes, but also across broader non-defence specific regulatory framework, with the aim of removing barriers to defence readiness and industrial ramp-up.

The key measures proposed in the Defence Readiness Omnibus address the following areas:

• Reducing the administrative burden in the European Defence Fund (EDF)
• Speeding up intra-EU transfers of defence products
• Encouraging joint defence procurement
• Fast-tracking permitting regime for defence-related infrastructure projects
• Clarifying EU-wide rules, including competition and environmental laws
• Ensuring that chemical regulations accommodate defence needs
• Improving access to finance

The European Economic Security Package

Alongside efforts to strengthen internal defence readiness, the EU is also reshaping how it controls the flow of sensitive goods, technologies and capital beyond its borders. The Defence Readiness Omnibus aims to foster a Union-wide defence-readiness mindset, but it is only one piece of a broader shift towards a more strategic and security-driven approach to trade and investment.

Export controls have become central to the EU’s emerging security-first policy approach. From advanced semiconductors and quantum technologies to dual-use software and defence equipment, Brussels is tightening the grip on what can leave the Union, and under what conditions.

At the core of this transformation are new and evolving instruments, notably a modernized Dual-use Regulation since 2021, a more unified EU approach to the export of dual-use items, and a fast-developing agenda in relation to adjacent instruments such as foreign direct investment (FDI) screening and emerging outbound investment controls. These tools are designed to safeguard critical technologies and to ensure that EU’s economic openness does not come at the expense of its security.

The Defence Readiness Omnibus and the European Economic Security Package mark a significant step in strengthening the EU’s defence and security ecosystems. Both initiatives contain a wide range of proposals, but two stand out: (1) facilitating intra-EU transfers of defence-related products, aimed at reducing administrative burden and speeding up supply chains in the Single Market and (2) Strengthening the screening of foreign direct investments, designed to better protect critical technologies and assets from potential acquisitions. Because of their immediate operational and strategic implications for businesses and the field of export controls, we first examine these two measures in detail. We then turn to the rest of the proposals in both the Defence Readiness Omnibus and the European Economic Security Package to provide a comprehensive overview.

Speeding up Intra-EU Transfers of Defence Products Under the Defence Readiness Omnibus

The Russian invasion of Ukraine has underscored the need for a strengthened Union-wide market for defence products, capable of supporting the defence readiness of Member States in the face of emerging security threats.

To address the lack of harmonization of control systems within the EU, the insufficient use of General Transfer Licences (which are a key simplification tool), unnecessary complexities and delays in intra-EU transfer controls, the Defence Readiness Omnibus proposes several amendments to Directive 2009/43/EC on intra-EU transfers of defence-related products:

• Extend the exemption from prior authorisation for transfers: transfers of defence-related products within the Union are subject to prior authorisation through general, global or individual transfer licences. In some instance, Member States may exempt transfers from this requirement. The Defence Readiness Omnibus considers that it is appropriate to broaden the list of situations in which such exemptions may apply, notably for the implementation of certain projects, including those funded by EU defence industrial programmes, or for transfers to EU institutions and bodies of the European Defence Agency, and in case of an emergency resulting from a crisis.
• Empowering the Commission: given the rapidly evolving security landscape, additional flexibility is needed to enable the Commission and the Member States to react in a targeted and agile way. Thus, the Defence Readiness Omnibus suggests empowering the Commission to define certain non-essential elements of the transfer framework. In addition, the proposal delegates to the Commission the authority to adopt acts establishing harmonised conditions under which the Member States determine the type of transfer licence applicable  to specific defence-related or categories of defence-related products.
• Ensure that all suppliers wishing to transfer defence-related products may use or apply one of the available licences. Any pre-conditions that may be imposed by Member States should be based only on criteria of direct relevance for the suppliers’ ability to respect the legislation in the field of transfer and export controls.
• Extended de minimis options. The Commission calls on Member States to refrain from intra-EU transfers limitations for components that will be integrated in a final product in another Member State and cannot be re-exported separately. The Commission calls for Member States to at least introduce de minimis principle already used by some Member States.
• Extend the general transfer licence to certified recipients who have demonstrated strong capacity to comply with transfer and export control rules and have supported important costs to achieve certification. These entities should benefit from simplified and less burdensome possibilities to perform intra-EU transfers.
• Introduction of a new general transfer licence option for the implementation of Union defence industrial programmes (such as the EDF): The scope of these licences should cover all the transfers, whether tangible or intangible, that the supplier has to perform for the implementation of the project. For EDF-funded products and technologies transfers, for instance, the relevant amending Regulation provides that Member States must endeavour to use general transfer licences and avoid disproportionate administrative pre-conditions to ensure the seamless implementation of the EDF actions. Member States may also foresee that these licences cover the entire lifecycle of the developed product in a project, including production, maintenance and upgrade phases. Such changes would improve efficiency and facilitate collaboration amongst participating undertakings while reducing delays.
• Changes to the provisions on the information that suppliers of defence-related products must provide, to add flexibility and give the possibility to apply the information requirements only to the extent it does not result on overly burdensome reporting obligations for suppliers. In addition, the Commission also wishes to closely work with the Member States to manage the heavy burden that comes with managing multiples national End User Certificates and other forms of banning intra-EU transfers limitations.

Foreign Direct Investment Screening Update Under the European Economic Security Package

One of the five initiatives of the European Economic Security Package was to strengthen the protection of EU security and public order by proposing improved screening of foreign direct investment into the Union. The goal was to address some shortcomings of the existing 2019 FDI screening mechanism, in a move to weave together the threads of foreign direct investment screening and export control policy into a more coherent and strategic framework for protecting the Union’s security and technological edge.

At the heart of the proposal is the Commission’s suggestion to expand significantly the scope of “notifiable investments” to cover sectors that are highly relevant for export control purposes, including dual-use goods and technologies, military items covered by the Common Military List, advanced semiconductors technologies, artificial intelligence technologies, quantum technologies, biotechnologies, advanced connectivity, navigation and digital technologies, advanced sensing technologies, space and propulsion technologies, energy technologies, robotics and autonomous systems, advanced materials, manufacturing and recycling technologies, critical medicines. With the proposal, where a target is economically active in one of these area, Member States are required to screen the foreign investment.

While export controls regulate what can legally leave the EU, in terms of sensitive goods, software and technologies, this reinforced FDI screening mechanism on critical sectors can determine who can own, access or influence those same sensitive goods, software and technologies.

Other changes included the introduction of a FDI screening mechanism, mandatory for all Member States, and the extension of the screening scope to cover indirect (intra-EU) investments made by EU investors that are ultimately controlled by individuals or businesses from non-EU countries.

On 8 May 2025 and 11 June 2025 respectively, the Parliament and the Council adopted their first reading position. On 17 June 2025, interinstitutional negotiations (trilogue) began aimed at reaching an agreement on a revised FDI Regulation.

Other Key Measures of the Defence Readiness Omnibus

Reducing the Administrative Burden in the European Defence Fund

The European Defence Fund, created in 2021, is the EU’s only instrument dedicated to supporting collaborative Research and Development in the defence sector. Its primary aim is to (a) foster cooperation among companies, including SMEs and research actors across the Union; (b) boost defence capability development through investment, and (c) help EU companies develop cutting-edge, interoperable defence technologies and equipment. In this way, the EDF funds competitive and collaborative projects that deliver innovative and interoperable defence technologies and equipment solutions for Europe’s defence needs.

While the Commission confirms that the EDF is effective and relevant, its assessment also revealed the need for simplified procedures and a reduction of the administrative burden for operators. Consequently, in the Defence Readiness Omnibus, the Commission added a proposal to provide further flexibility in the implementation of the EDF,[1] including:

• Simplification of award criteria: The current award criteria for the evaluation of proposals under the EDF are overly complex, unclear and difficult to apply in practice. Moreover, all the criteria must be assessed for each proposal. The proposal simplifies the criteria and includes the possibility to select only the most relevant subset of award criteria based on the objectives of the call for proposals, amongst the amended list of criteria below:
  • Its contributions to excellence in the defence domain;
  • Its contribution to the innovation or potential of disruption of the EU defence industry;
  • Its contribution to the competitiveness of the European Defence Technological and Industrial Base by creating new market opportunities across the EU and beyond;
  • Its contribution to reducing dependency on non-EU sources and strengthening supply security;
  • Its contribution to cross-border cooperation across Member States and associated countries;
  • Its quality and efficiency in the implementation of the action;
  • Its contribution to increased efficiency across the life cycle of defence products and technology;
  • Its contribution to the integration of the EU defence industry throughout the EU, regarding joint use, ownership or maintenance of the final product or technology.

The last two criteria have been added in the proposal. The Commission removed the criteria relating to promising future technological improvements, and the criteria relating to the avoidance of unnecessary duplication.  It also eliminated from the criteria the requirement for the proposed action to have a demonstrably positive balance of cost-efficiency and effectiveness.

• Additional flexibility with the possibility to implement the EDF through annual or multi-annual work programmes. This would enable the fund to better support long-term research and development projects. Currently, the framework requires to the adoption of annual programmes, which hinders the predictability and continuity of actions.
• Clarification of the conditions under which the Commission may have recourse to direct awards to allow it to manage the programme with more flexibility, improve the use of resources and reduce the administrative burdens.
• Facilitation of the use of indirect management, which is currently limited to exceptional cases.
• Simplifications in the pre-commercial procurement of research and development services and access rights of co-financing Member States. The current text is complex and lacks clarity regarding the conditions for pre-commercial procurement and promotes the award of multiple sourcing contracts within the same procedure, which is not always suitable for the defence sector. The proposal removes this restriction.
• Speeding up the evaluation of proposals and reducing the time to sign grant agreements and issue payments. The Commission will also put in place additional measures to extend validity of ownership control assessments for beneficiaries from 18 to at least 36 months and introduce standard non re-transfer clause.
• Confidentiality. To respond to the call for a simple and secure system to exchange confidential and sensitive information, the SUE (Secret de l’Union Européenne) systems is progressively rolled out among the Commission, Member States and industry with the aim to equip all Member States by early 2026. The establishment of a Classified Cloud for the exchange of information accredited up to Restreint UE/ EU Restricted level in the implementation of defence classified projects is being explored.
• Making costs for testing activities outside the EU eligible for funding under the EDF. Currently, there is a requirement that all infrastructure, facilities, assets and resources used for the implementation of EDF funded projects be located within the Union to be eligible for funding. However, this requirement limits the potential to benefit from testing opportunities. To address this limitation, the proposal allows for the costs of carrying out testing in third countries, such as Ukraine, to be eligible for EDF funding. By allowing costs of testing activities carried outside the Union to be eligible for funding, the EDF would be able to support the development of more effective and innovative defence solutions, ultimately contributing to the enhancement of the Union’s defence capabilities.

Encouraging Joint Defence Procurement

While a fully-fledged revision of the Defence and Sensitive Security Procurement Directive (2009/81/EC) is scheduled for 2026, the Union considers that procurement rules are overly complex, burdensome and require disproportionate resources from Member States, and that some procurements rules must be simplified as a matter of urgency and priority. Most notably, the Defence Readiness Omnibus proposes the following urgent, and targeted simplification to Union procurement rules:

• Boosting industry responsiveness through contract flexibility: the availability of procurement contracts and the long-term predictability of demand are critical for the industry to ramp up its production capacities and meet readiness objectives. To support this, the Commission proposes doubling the threshold for the applicability of the Directive from EUR 443 000 to EUR 900 000 for supply and service contract. This change will exempt smaller contracts from the scope of the Directive.
• Facilitating rapid replenishment through off-the-shelf purchases: the challenging pace at which Member States currently need to replenish their arsenals requires the recourse to already available defence products. Therefore, the Commission proposes easing the rules for purchasing already available defence products. Specifically, it recommends temporarily extending the use of the negotiated procedure without prior publication to common procurement and maintenance. This temporary derogation would allow Member States to swiftly acquire standardized, readily available equipment, thus enhancing their defence readiness. It would also encourage joint purchases, enabling Member States to pool resources, benefit from economies of scale, and accelerate the acquisition of critical equipment capabilities.
• Facilitating collaborative investment to strengthen technological sovereignty: enhancing the Union’s technological sovereignty requires improved and more accessible collaborative investments. Joint procurement by Member States is key to improve efficiency, effectiveness, and interoperability of defence capabilities. This initiative facilitates the procurement of innovative solutions to drive defence transformation through disruptive innovation. It introduces accelerated procedures for innovative procurement and collaborative projects, including a streamlined innovation partnership process and clarifications on procuring results from projects funded by the EDF. These measures will enable a smooth transition from research to procurement. The proposal also specifies that Member States may benefit from exemptions for cooperative R&D programmes under the same conditions as projects funded by defence research initiatives, such as the EDF.  This will allow EDF projects to continue within a collaborative framework even after the completion of the R&D stage.
• To help Member States meet their capability targets more rapidly, the Defence Readiness Omnibus proposes extending the maximum duration of framework agreements to 10 years. This aligns with provisions already put forward in the European Defence Industry Programme (EDIP) Regulation. In parallel, the Commission is urging Member States to review their national procurement rules (‘gold-plating’) to eliminate burdens placed on participants in public procurement procedures.

The Defence Readiness Omnibus further outlines essential simplifications and clarifications across non-defence-specific EU frameworks.

• Fast-tracking permitting regime for defence-related infrastructure projects

The Defence Readiness Omnibus calls for a fast-tracking permitting process for defence industrial investment and activities as lengthy and burdensome procedures adopted in peace time are now ill-suited to cater for urgent readiness needs. The Commission believes this can be achieved by establishing fast-track and priority-rated national permitting processes with a single point of contact for industry.

• Clarifying EU-wide environmental rules and ensuring that chemical regulations accommodate defence needs

The primary focus of the non-defence related simplifications proposed by the Commission is the elimination of regulatory bottlenecks in environmental and chemical regulations.

While ensuring high standards of protection of environment and human health through the application of Union environmental legislation is fundamental, the Commission clarified that Member States can use existing derogations in various Union legislations (e.g., the Habitat Directive, the Birds Directive, the Water Framework Directive, the Waste Shipment Regulation) provided for “overriding public interest”, “public safety”, and “crisis” to include defence readiness in their scope, encompassing industrial and government defence investments and defence readiness activities.

On the chemical side, the Commission also proposes to extend derogations under the Registration, Evaluation, Authorisation and Restriction of Chemicals Regulation (REACH) to incorporate defence readiness objectives. Currently, the Regulation does not explicitly foresee early assessment of the impact on the defence industry in the processes of banning or restricting chemical substances. The Commission encourages Member States to use the exemption to its full potential for defence needs, including defence readiness activities. The aim is to have defence concerns, including indirect impacts on defence supply chains, comprehensively assessed.

Finally, and to further eliminate bottlenecks and enhance the Union’s defence industrial production capacity to be able to acquire the critical capabilities it currently lack, the Commission encourages Member States to make full use of the possibility to suspend imports duties on certain weapons and military equipment imported by or on behalf of military defence authorities from third countries. Further, the waiver on duties applicable to some industrial, raw materials, semi-finished goods or components imported under the Autonomous Tariff Suspensions and Quotas Scheme could also be used to improve the competitiveness of the defence sector.

• Clarifying EU-wide competition rules, state aid and facilitating access to financing

To ensure the effective deployment of the necessary investments, the Defence Readiness Omnibus also addresses competition rules, state aid and access to financing. The Commission will consider the specificities of the defence industry and its contribution to the “defence readiness 2030” objective in its competition enforcement, including giving adequate weight to the changed security environment in merger assessments.

Regarding antitrust rules, the Commission is ready to provide guidance on cooperation projects for companies in the defence sector where such cooperation is necessary for production scale-up, product manufacturing, and joint procurement of raw materials.

The proposal clarifies that state measures supporting general infrastructure (e.g., railway, mobility corridors, etc.) or the functions of armed forces are public-remit activities and not State aid, which do not require notification from Member States to the Commission. In the interest of ramping-up defence production, State aid measures supporting investments in production capacity for defence products and services can be deemed to support essential security interests within the scope of Article 346 of the Treaty of the Functioning of the European Union (TFEU) and thus would not require notification, which would drastically streamline the process. Where public support constitutes State aid, and hence notification remains necessary, the Commission will prioritise treatment and take the measure’s contribution to defence readiness into due account.

Further, private investments will also be facilitated by proposing adaptations to the InvestEU Fund’s eligibility criteria for the defence sector to enhance and simplify access to financing for the European Defence Technological and Industrial Base.

Lastly, the Commission provides clarifications in its Guidance Notice to offer legal certainty to investors on the application of the Sustainable Finance Framework to defence investments. The Commission may also make further adjustments in the upcoming review of the European Sustainability Standards and provide clarifications on the interplay between defence investments and the EU sustainability framework during the review of the Sustainable Finance Disclosure Regulation.

The Defence Readiness Omnibus proposal has been transmitted to the European Parliament and the Council and will now follow the ordinary legislative procedure. The relevant committees within the Parliament have been assigned (e.g., SEDE, IMCO, ENVI, ITRE) and at the Council, the Defence Industry Working Party is expected to host negotiations at the technical level.

Other Relevant Measures Under the European Security Package

Better Coordination in National Export Controls

Russia’s war of aggression against Ukraine triggered an unprecedented and swift deployment of sanctions and disrupted the ability of the multilateral export control regimes to reach new decisions on export controls. As a result, gaps have emerged in the adoptions of new export control controls, prompting the proliferation of national controls on emerging and advanced sensitive technologies, including within the Union.

This trend has led to a fragmented approach, with a patchwork of additional national measures undermining the integrity of the single market. For example, in 2023, the Netherlands and Spain adopted several national control measures, which were published in the European Commission’s first compilation of national control list released in October 2023. This compilation has been revised in September 2024 to add the national controls adopted by France on goods and technologies associated with quantum computing and advanced electronic components, including semiconductors.

In its White Paper on export controls, part of the European Economic Security Package, the Commission highlighted the lack of transparency and insufficient consultation among the Member States when adopting national control lists.

To address these concerns, in April 2025, the Commission adopted the Commission Recommendation (EU) 2025/683 on coordination of national control lists providing a coordination framework. In particular, the Recommendation suggests that Member States, on a voluntary basis, inform each other and the Commission about identified risks and national controls under consideration. Member States which may have identified identical or similar risks or have the intention of controlling similar items may coordinate their actions. Overall, the Recommendation encourages Member States to communicate about the adoption of the national list, the timing of adoption, and the implementation.

The exchange of writing information between the Member States and the Commission should take place via the electronic licensing systems used by the competent authorities to deliver licenses.

Outbound Investments

In January 2025, the Commission adopted a Recommendation calling on EU Member States to review outbound investments of their companies in non-EU countries.

As the Commission recognized in the European Economic Security Package, with rising geopolitical tensions and global economic integration, certain economic flows and activities can present a risk to EU’s security, most notably when involving a set of technological advances that can enhance military and intelligence capabilities of actors that may use them to undermine international peace and security.

Therefore, such leakage must be prevented from being enabled by EU-originating capital, knowledge, or expertise, including via outbound investments.

Thus, Member States have been invited to review investments related to certain specific high-risk technology, including semiconductors, artificial intelligence and quantum. The types of investments under review include mergers and acquisitions, transfer of assets (including IP rights), greenfield investments, joint ventures, and venture capital investments.

Member States were tasked to provide a progress report by 15 July 2025, and a comprehensive report on their implementation of this Recommendation and any risks identified by 30 June 2026.

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Please do not hesitate to get in touch with Cassidy Levy Kent’s sanctions and export controls team in Brussels, or your usual contact in any of Cassidy Levy Kent’s offices, with any questions.

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[1] Communication From the Commission to the European Parliament and the Council – Defence Readiness Omnibus, 17 June 2025, COM(2025) 820 final, p. 6.