The European Commission on Tuesday unveiled a series of measures it hopes will slash red tape for the defence sector and get it to start significantly boosting production.
The so-called Simplification Omnibus includes measures to fast-track permitting for defence companies, facilitate cross-border movement through the supply chain, as well as guidance to improve access to finance and to dangerous chemical substances.
It comes three months after the release of the ‘Readiness 2030’ plan to increase the production and deployment of critical military capabilities the EU needs by 2030 when intelligence agencies believe Russia could be in shape to attack another European country.
The proposal planned for up to €800 billion to be poured into the sector over the coming four years through relaxed fiscal rules and loans from the Commission of money raised on the markets.
“Money alone, however, is not enough, if traditional ‘red tape’, which maybe is fit for peacetime, will kill industrial efforts to ramp-up production,” Andrius Kubilius, the Commissioner for Defence and Space told reporters at a press conference on Tuesday.
“Now we need rules that give industry, armed forces and investors speed, predictability and scale,” he added.
Fast-track permitting
One of the flagship proposals of the latest package is for member states to create a single point of contact for defence companies to submit permit requests, with authorities urged to respond within a 60-day timeframe.
Currently, it can take up to three or four years for defence companies to secure the various permits they need to expand their operations, with the required paperwork, such as environment impact assessments, different from agency to agency.
Environmental NGOs, among other citizen groups, may well have a problem with that fast-track approach. “What we also indicate is that whenever there are subsequent litigation or claims – being administrative or judicial – they should also be treated as a priority according to the law,” the Commission official said when quizzed on potential legal challenges.
Another key plank of the proposal is to amend the Defence Procurement directive – to facilitate joint procurements – and the directive on Intra-EU transfers of defence products.
For the latter, the Commission seeks to create a single dedicated licence to allow components necessary for the production of a defence investment project to cross borders as many times as necessary without applying for a new licence each time – a process that can currently delay projects by up to one and a half years.
These “quick fixes”, the Commission official said, can “save a lot of time”.
How “quick” they will be will however depend on European lawmakers and member states who will have to negotiate and approve the amendments, as well as the new legislation foreseen in the package.
Access to chemicals and finance
Other elements seek to clarify which environmental and health and safety derogations can be applied to the defence sector and which parts of the sector investors may safely pour money into while respecting the bloc’s environmental, social and governance (ESG) rules.
Chemicals are a critical part of weapons production, especially ammunition, but the use of many chemicals is restricted in the EU under its REACH legislation to protect human health and the environment from the risks they carry. A proposal to further restrict the use of PFAS (per- and polyfluoroalkyl substances) on specific sectors is currently also being examined by the EU.
As such, member states have different rules on their use depending on the type of substance, the manufacturing purpose and how much is required with licences often granted on a case-by-case basis.
The Commission’s upcoming guidelines will therefore aim to highlight that REACH includes a derogation that would allow member states to approve, at the national level, the use of certain chemicals citing the need to boost defence readiness production or activities.
This was a core ask from the industry.
“If we have to replace these substances immediately, we won’t have a way of manufacturing things,” Micael Johansson, the CEO of Swedish aerospace and defence company Saab and president of the Aerospace, Security and Defence Industries Association of Europe (ASD) told Euronews last week.
“We have to make decisions on what’s most important now for manufacturing so maybe we need some sort of exemptions from that in this crisis situation where we have to build things,” he added.
Another set of guidelines will seek to reassure financial institutions that they will not be penalised for pouring money into the sector by clarifying that “the Union’s sustainable finance framework does not impose any limitations on the financing of the defence sector,” Valdis Dombrovskis, the Commissioner for Trade, told reporters.
The guidance will indicate that defence investments “can contribute to the stability and security and peace in Europe”, the official speaking on condition of anonymity said, and that only prohibited weapons are strictly off-limits.
The Commission expects “the cost-saving of the simplification of procedures to be major”, the official also said, although an estimate is not expected to be released until later in the summer.
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