The European Commission has shut out defence companies from the UK and other third countries from the European Union’s common defence fund.
In a proposal for a council regulation on the Security Action For Europe (SAFE) instrument, dated March 19, commission officials set strict eligibility criteria for arms procurements by member states financed through the €150 billion SAFE fund.
Contractors involved in common procurement must be established and managed inside an EU, European Economic Area (EEA) or European Free Trade Association (EFTA) State – or Ukraine.
Likewise, the companies must also be controlled by an entity from such a state, unless the controlling entity has been subject to security screening. The factories and other facilities used for arms manufacturing financed by SAFE must also be located in the territory of an EU, EEA or EFTA member state or in Ukraine.
Moreover, at least 65 per cent of the value of the final product must come from said group of countries. The rules also extended to subcontractors that contributed more than 15 per cent of the value of the end product.
This meant British arms producers such as BAE Systems (formerly British Aerospace) and Babcock would be effectively excluded from most of the contracts paid with funds coming from the new EU instrument.
US or Turkish defence companies also fell under the remit of the article, while most other European countries that had noteworthy defence sectors but were not EU member states were either members of EEA or EFTA, for example Switzerland.
The clause was included in the proposal at the behest of French President Emmanuel Macron, as British newspaper The Times reported on March 19.
Macron had recently tried to convince European nations to buy French-made weapons such as the Rafale fighter jet and SAMP/T air-defence systems instead of their mostly US-made counterparts.
Defence officials have reportedly noted, though, that many products of the French arms industry are both less good and less easily available than comparable systems from third countries, according to military news portal Defence Express on March 17.
The commission proposal left one loophole for Britain and other “third countries” to deliver arms financed by SAFE loans.
The EU may conclude security agreements with “like-minded” countries that included their defence manufacturers in the list of eligible suppliers. Reportedly, UK Prime Minister Keir Starmer may sign such an agreement in May.
Any such partnership would come at a cost. The commission proposal mandated that the security agreements with third countries must “ensure a fair balance of contributions” – a demand reiterated by the German ambassador to the UK, Miguel Berger,.
According to The Times, he told UK radio that Britain had to pay its “fair share” into the EU defence fund. “Obviously EU taxpayers’ money cannot go simply into British companies,” Berger said.
While other third countries were excluded a priori from EU procurement, there was a blanket exception for Ukraine. EU countries may use loans from the €150 billion SAFE fund to buy Ukrainian-made arms without limitations.
Since the 2022 Russian invasion, Ukraine has become a major producer of certain types of military equipment, including a wide array of combat drones.
In March 2025, Lithuanian defence minister Dovile Sakaliene announced her country was establishing a joint weapons production facility with Ukraine, although it was not disclosed what weapons would be manufactured.
