EU Launches Security Action for Europe (SAFE): Major New Funding and Procurement Opportunities for the Defense Industry, with Special Benefits for SMEs

The European Union has introduced the Security Action for Europe (SAFE), a groundbreaking initiative designed to rapidly strengthen the European defense industry in response to the heightened security threats stemming from Russia’s aggression against Ukraine. This temporary emergency instrument will make up to EUR 150 billion in loans available to EU Member States for urgent, large-scale investments in defense industrial capacity, with a strong emphasis on common procurement and collaborative projects.

Below, we summarize the key features of the SAFE program, highlight how in particular small and medium-sized enterprises (SMEs) can benefit, and outline how HEUKING can support your business in navigating and capitalizing on these new opportunities.

Key Features of the SAFE Program

1. Purpose and Context

SAFE is a direct response to the deteriorating European security environment and the need for the EU to act more autonomously in defense matters. The program aims to address critical capability gaps, ramp up industrial capacity, and foster a more resilient and competitive European Defense Technological and Industrial Base (EDTIB).

2. Financial Mechanism

• Up to EUR 150 billion in loans available to Member States.
• Loans support investments in the EDTIB, with a focus on rapid, coordinated, and collaborative efforts.
• The program is temporary, with loan requests accepted until December 31, 2030. 

3. Focus on Common Procurement

• Financial assistance is conditional on collaborative procurement: at least two participating countries (EU Member States, EEA EFTA States, or Ukraine) must be involved in each project.
• Priority investment areas include air and missile defense, artillery systems, missiles and ammunition, drones and anti-drone systems, strategic enablers, critical infrastructure protection (including space, cyber, AI, and electronic warfare), and military mobility. 

4. Eligibility and Participation

• Contractors and subcontractors must be established and have executive management in the EU, EEA EFTA States, or Ukraine, and not be controlled by third countries (with certain exceptions subject to screening and guarantees).
• At least 65 % of the value of end products must originate from the EU, EEA EFTA States, or Ukraine.
• The program allows for the participation of acceding countries, candidate countries, and third countries with a Security and Defense Partnership with the EU, under specific conditions. 

5. Accelerated and Simplified Procurement

• The SAFE Regulation goes beyond the previous rules and provides for several key procurement law features for procurements supported by the SAFE instrument.
• Urgency Procurement: For all procurements carried out under the SAFE instrument, it is generally assumed that a crisis situation exists, justifying the use of the negotiated procedure without prior publication under Art. 28(1)(c) of Directive 2009/81/EC. This allows Member States to procure more quickly and flexibly.
• Opening of Existing Framework Agreements: Existing framework agreements or contracts can be opened to additional public contracting authorities, even if this was not originally provided for. Substantial changes in quantities are also permitted, provided the original contractors agree and the new contracting authorities receive the same rights and obligations.
• Eligibility Conditions: The SAFE Regulation sets strict conditions for the participation of contractors and subcontractors, particularly regarding their registered office, control, and use of resources within the EU, EEA, or Ukraine. Exceptions are only possible under strict conditions. Temporary VAT exemptions apply to defense products supplied under SAFE-supported contracts. 

6. Oversight and Reporting

• The European Commission will manage the program, assess investment plans, and monitor compliance.
• Member States must submit detailed investment plans and progress reports to access and maintain funding.

Special Opportunities for SMEs under SAFE

The SAFE program explicitly recognizes the importance of SMEs, mid-caps, and new entrants in strengthening the European defense industrial base. Member States are encouraged to include measures in their European Defense Industry Investment Plans that facilitate access to the defense market for SMEs and foster their participation in collaborative procurement projects. This includes:

• Easier Market Access: SAFE aims to reduce barriers for SMEs by promoting their involvement in common procurement and by encouraging Member States to design investment plans that specifically support SME participation.
• Consortium Opportunities: SMEs can join consortia with larger industry players or other SMEs across Member States, EEA EFTA States, and Ukraine, increasing their chances to participate in large-scale defense projects.
• Innovation and Niche Capabilities: SMEs with specialized technologies or innovative solutions are well-positioned to contribute critical inputs to projects in priority areas such as cyber, AI, electronic warfare, and advanced manufacturing.
• Financial Support and Risk Sharing: By participating in SAFE-supported projects, SMEs can benefit from the financial backing of Member States and the EU, reducing the risks associated with entering or expanding in the defense sector.
• Visibility and Growth: Participation in SAFE-funded projects can enhance the visibility of SMEs, open up new business opportunities, and foster long-term growth within the European defense supply chain.

How HEUKING can assist your business

As a leading German law firm with deep expertise in the aerospace and defense sector, Heuking is uniquely positioned to help clients – including SMEs – leverage the opportunities presented by the SAFE program. Our services include:

Strategic Advisory and Eligibility Assessment

• Evaluating your company’s eligibility to participate in SAFE-funded projects, including compliance with origin, management, and control requirements.
• Advising on structuring consortia and partnerships to meet common procurement criteria, with a focus on maximizing SME involvement. 

Support with Investment Plans and Applications

• Assisting in the preparation and submission of European Defense Industry Investment Plans required for Member States and their industrial partners, ensuring that SME interests are represented and supported.
• Advising on the documentation and reporting obligations to ensure continued access to SAFE funding. 

Procurement and Contracting

• Guiding clients through the new, accelerated procurement procedures, including negotiated procedures and framework agreement modifications.
• Drafting and negotiating contracts that comply with SAFE’s eligibility and origin requirements, as well as EU and national security interests. 

Regulatory and Compliance

• Advising on screening and mitigation measures for entities with non-EU ownership or control.
• Ensuring compliance with EU rules on classified information, VAT exemptions, and reporting. 

Cross-Border and International Collaboration

• Facilitating partnerships with entities in other Member States, EEA EFTA States, Ukraine, and eligible third countries.
• Advising on the participation of SMEs, mid-caps, and new entrants in the defense market, and helping SMEs identify and connect with suitable partners. 

Ongoing Monitoring and Risk Management

• Providing ongoing legal support to ensure compliance with evolving EU regulations and SAFE program requirements.
• Assisting with audits, controls, and dispute resolution related to SAFE-funded projects.

Contact us

If you are interested in exploring opportunities under the SAFE program, especially as an SME, or have questions about how these developments may impact your business, please contact our Aerospace & Defense team at HEUKING. We are ready to provide tailored legal and strategic support to help you succeed in this new era of European defense cooperation.