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 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;

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:

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

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.

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 ANNEX SAFE INSTRUMENT VAT EXEMPTION CERTIFICATE