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Defence procurement contracts · EU and NATO

EU and NATO defence procurement

In the EU, Directive 2009/81/EC sets the award rules for defence and sensitive security contracts, implemented in each member state's law. It leaves most contract terms, such as termination, liability and payment, to national law and the contract, but requires authorities to set out security of information and security of supply requirements. NATO's procurement agency (NSPA) and the European joint armaments agency (OCCAR) buy under their own regulations. EU defence funding (the European Defence Fund, EDIP and SAFE loans) adds grant and loan terms on top.

Randeep Bubbra | Lawyer | Making defence financeable

What to know

  • The Directive lets authorities require tenderers to show they can honour export, transfer and transit obligations, and to disclose restrictions arising from export control or security arrangements.
  • Authorities can require sub-contracting to be competed, or require changes of sub-contractor to be notified.
  • Classified information must be protected at the level the authority specifies, and member states recognise each other's equivalent security clearances.
  • Foreign investment screening is national, coordinated under Regulation (EU) 2019/452.
  • NSPA and OCCAR contract terms are set in each agency's own procurement regulations and contract conditions.

The instruments

Term by term

Award route and challenge

Directive 2009/81/EC, as implemented in each member state. NSPA and OCCAR use their own procurement regulations.

Termination for convenience

Not harmonised by the Directive. Set by national law and the contract.

Pricing and profit

National cost and profit rules. NSPA and OCCAR price under their own regulations.

IP and technical data

Set by each contract or grant agreement and national law.

Liability and indemnities

Set by national law and the contract.

Export control

Dual-use Regulation (EU) 2021/821 for dual-use items. Military exports are licensed nationally under Common Position 2008/944/CFSP.

Security and classified work

Directive 2009/81/EC lets authorities set security of information requirements. Member states recognise equivalent security clearances.

Cyber

No EU-wide defence cyber clause. National requirements apply through the contract.

Assignment and financing consents

Set by national law and the contract. Consent of the contracting authority is the norm.

Change of control and novation

National foreign investment screening, coordinated under Regulation (EU) 2019/452, and consent rights in the contract.

Government remedies and debarment

Mandatory exclusion grounds in Article 39 of Directive 2009/81/EC, applied through national law.

Payment and milestones

Set by national law and the contract. EU funding (EDF grants, SAFE loans) pays member states and consortia on its own schedules.

Disputes and governing law

National law and courts, or arbitration where the contract provides for it.

Industrial participation and offset

EU law restricts offsets in procurement between member states. They remain common in exports outside the EU.

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General information on public law and standard terms as at 28 Oct 2026, not legal advice on any contract or transaction. Quoted wording is checked against the official text linked to it.