Moving towards a SAFE Defense Policy in Europe

Russia’s attack on Ukraine has presented Europe with new challenges, affecting not only energy policy, but also security. As a response, the EU adopted the “Strategic Compass” back in 21 March 2022, within which it defined an increase in investments in the defense industry as one of the central pillars of the European security architecture. A series of legal acts on the joint procurement of defense equipment followed (see here and here). It was in this context that the so-called SAFE Regulation was adopted in 2025. It is based on Article 122 TFEU and is intended to accelerate efforts to achieve autonomous defense capability. By choosing this legal basis, the Commission continues a trend which begun in the pandemic and was reinforced during the energy crisis: relying on emergency competences without parliamentary involvement. The European Parliament has decided to challenge this tendency in case of the SAFE Regulation, and it remains to be seen whether the Court will use this opportunity to reaffirm the exceptional nature of Article 122 TFEU. But whether this exceptional provision can legitimize the profound changes facing the Union is doubtful.

Ramped up defense investment through SAFE

The SAFE instrument pursues the central aim of sustainably strengthening the European defense industry through targeted and extensive public investments. Its primary focus lies in creating additional production capacities to ensure two things: the timely availability of defense goods, and the adaption of the industry to the structural changes triggered by Russia’s war of aggression. At the same time, the instrument seeks to cushion the economic consequences of the deteriorating security situation by providing financial support to Member States in meeting their immediate procurement needs (Article 3 Reg. 2025/1106). The instrument is presented as an exceptional and temporary response to an existential security challenge. Specifically, the regulation contains rules on the provision and use of Union financial assistance for Member States, as well as rules to simplify and accelerate the procurement process in the field of defense goods (Article 1 Reg. 2025/1106).

The key tool of the instrument is the provision of loans amounting to EUR 150 billion (Article 5, 6 Reg. 2025/1106). The Union relies on the principle of back-to-back lending, a well-established form of Union financing (Article 9 Reg. 2025/1106), in which the Commission raises money on capital markets and lends it to Member States under those same financial conditions. The assistance is therefore budget neutral. To access SAFE funds, Member States should submit an application as well as an investment plan to the Commission, which has to be approved by the Council (Article 7, 8 Reg. 2025/1106). The investment plan must, in addition to some formal requirements, describe what demand for defense goods and other items for defense purposes a Member State seeks to finance (Article 7(2)(a) Reg. 2025/1106). Furthermore, certain conditions for the use of funds must be fulfilled. Specifically, the funds should aim to speed up the adjustment of the defense industry to structural changes, improve the timely availability of defense products, and ensure interoperability and interchangeability across the Union (Article 4(1) Reg. 2025/1106).

This type of fund allocation strongly resembles that of the RRF Regulation, the main spending vehicle of NextGenerationEU (NGEU), Europe’s joint economic response to the pandemic. The Commission’s assessment criteria now appear to be broader compared to the pandemic instrument, however. As long as planned expenditures comply with the conditions of Article 4 Reg. 2025/1106, the Commission must propose the implementing decision. Another difference to the RRF lies in the allocation of funds: these are not distributed in advance among all Member States according to a fixed key but can be drawn upon as needed. The Commission is to ensure a fair distribution of funds based on the principles of equal treatment, solidarity, proportionality, and transparency (Article 8(5) Reg. 2025/1106). In addition, the three most favored Member States may not apply for more than 60% of the total volume (Article 13 Reg. 2025/1106). Accordingly, there is no – or at best only an informal – examination of which Member State is economically most affected by the additional defense expenditure.

Another comparison with the RRF arises with regard to the disbursement modalities. Disbursement takes place in tranches, however payment is not linked to the achievement of pre-defined milestones, but only to whether the payment requests meet the principles of completeness, correctness and coherence (Article 12(3) Reg. 2025/1106). The provision of loans ends on 31 December 2030 (Article 12(1) Reg. 2025/1106). The Commission must report annually to the European Parliament and the Council on the use of funds (Article 15(1) Reg. 2025/1106).

In addition, the regulation contains specific provisions on the joint procurement of defense goods. Although procurement itself does not take place at the European level but through coordinated procedures of the Member States, SAFE creates an accelerated and flexible procedure for this purpose (Article 16–18 Reg. 2025/1106). Member States are assumed to be in crisis, making it permissible to use the negotiated procedure without prior public notice (Article 19 Reg. 2025/1106). Existing framework agreements or contracts can also be opened up to additional Member States (Article 17 Reg. 2025/1106). The regulation also provides for tax relief, such as VAT exemptions for the relevant procurement operations (Article 20 Reg. 2025/1106).

Emergency competence for structural change

The SAFE Regulation entails structural and long-term decisions that reshape the Union’s defense architecture. Such a policy shift requires a high degree of democratic legitimacy. Yet, the chosen legal basis in Article 122 TFEU cannot provide this.

To begin with, the Article contains two distinct legal bases: the first paragraph provides a more general authorization for economic policy measures, while the second offers a more specific one for financial assistance. As with the EURI Regulation, the linchpin of the NGEU program, which distributed emergency funds across various facilities and also relied on Article 122 TFEU, it is not specified which paragraph the legal act relies on. The SURE Regulation, an instrument for temporary support to mitigate unemployment risks during the pandemic, also illustrates this lack of specification. Yet, in contrast to the SAFE Regulation, the recitals of SURE explicitly state that the measure is based on both paragraphs of Article 122 TFEU. The Commission’s explanatory memorandum seems to suggest that it primarily intended to rely on Article 122(2) TFEU (see here). It would, however, have been more convincing to refer to both paragraphs. A legislative act can indeed rely on two legal bases, if  both components are inseparably linked, and their significance must be regarded as equal (C‑211/01, para. 40, C-155/07, para. 36). This can be assumed for the SAFE Regulation, which pursues two fundamentally different objectives – the provision of financial assistance (Article 122(2) TFEU) and the acceleration of procurement (Article 122(1) TFEU). Without the funds, procurement could not be financed, and without accelerated procedures, procurement would not take place in time. Nonetheless, it is striking that the legislator did not specify the paragraph once more. The deliberate ambiguity the EU created between the requirements of both paragraphs in effect blurs their normative boundaries.

It is also questionable whether the conditions for applying Article 122 TFEU are met. Both paragraphs contain exceptional provisions intended to enable the executive to react quickly to emergencies. That the current threatening security situation constitutes an exceptional state is hardly in dispute. But whether this circumstance qualifies as an “exceptional occurrence” within the meaning of Article 122(2) TFEU is debatable. Such an occurrence presupposes an unforeseen, to some extent surprising and sudden development or a rapidly evolving change in the economic situation – in any case, “visibly slow-developing or frequently or regularly occurring deteriorations of circumstances” are not covered by the provision. Article 122 TFEU is not intended to be used in every situation that deviates from normal conditions, but only in shock situations that occur with a certain speed. For this reason, the regulation does not refer only to the years-long war in Ukraine but rather vaguely to “uncertainties due to an emerging geopolitical situation.” This is likely an allusion to the U.S. government’s unwillingness to continue paying for Europe’s defense through national military spending. This unwillingness, however, is not limited to the current U.S. administration: the Biden administration also pointed to the need for higher European defense spending, and even the Obama administration had announced a “pivot to Asia.” This long-standing inaction has now created strong reform pressure. The Union – that much seems undisputed – must undergo comprehensive structural transformation to be regarded an equal player in the new geopolitical playing field. Against this background, it is difficult to argue that the current situation was unforeseen or surprising. Rather, the Europeans have brought themselves into this situation with open eyes.

The special urgency with which reliance on Article 122 TFEU is justified is also put into perspective if one considers that the European Parliament has established itself as a reliable partner in the legislative process since the Russian war of aggression. The regulations on joint ammunition procurement and general procurement acceleration show that rapid legislative responses were possible even in the early phase of the war. A significant slowdown in the legislative process would therefore not have been expected for the SAFE Regulation, either. This is already apparent from the European Parliament’s opinion, which did not raise substantive objections to the measure but only formally criticized the choice of legal basis. Accordingly, President Metsola, in a public letter to Commission President von der Leyen, called on her to choose an alternative legal basis. When the Commission did not comply, Parliament brought an action for annulment to the Court (see here).

The SAFE Regulation is symptomatic of a broader trend that started in the pandemic: using emergency competences to push through structural transformations without parliamentary deliberation (e.g., EURI, windfall tax). Ruffert rightly warns in this context of an emerging general competence (see here). Given the far-reaching legal and factual consequences of SAFE – from shaping long-term procurement priorities to locking in certain suppliers – this approach seems inappropriate and democratically questionable.

European solidarity does not justify the use of emergency competence

The measure also does not appear to be driven by an overriding need for solidarity between Member States as envisioned in Article 122 TFEU, a justification often invoked by the Commission and Council. Solidarity is a fundamental legal principle of the Union. It is mentioned multiple times in the treaties and is also defined as one of the common values to the Member States (Art. 2 TEU). It has been rediscovered in recent case law by the Court (C‑848/19  and C‑181/23). This jurisprudential line can, however, be traced back to the early years of the Community (C-11/69 and C-39/72).

Two specific sets of obligations derive from the principle. They can be categorized as material and procedural in nature (see here). Material obligations aim to create a fair balance between benefits and burdens of the membership of the Union. This can result in financial transfers; especially in urgent crises, vulnerable Member States may receive special (financial) support. Procedural obligations, in turn, require compliance with European law and the avoidance of measures that would undermine its practical effectiveness. The normative base can be found in the principle of sincere cooperation (Article 4(3) TEU).

While the SAFE Regulation provides financial assistance, it lacks safeguards to ensure a fair distribution. As shown above, it does not define an allocation key based on Member States’ economic needs. Instead, any Member State may apply for loans at their discretion, with only a cap of 60% for the three largest beneficiaries (Article 13 Reg. 2025/1106). Although the Commission must respect solidarity when distributing funds (Article 8(5) Reg. 2025/1106), the absence of predetermined criteria leaves this obligation vague and limited to avoiding arbitrary outcomes. In practice, economically strong Member States such as France are set to benefit substantially. In this respect, SAFE marks a step backwards compared to the RRF, which, despite justified criticism (see inter alia here or here), relied on transparent parameters for fund allocation. Solidarity should indeed guide the Union’s defense architecture. But invoking the term cannot substitute for concrete mechanisms that guarantee it.

Outlook

So far, the Commission has not had to fear judicial review with regard to its use of Article 122 TFEU. Actions against various regulations challenging the choice of legal basis – or at least those that would have provided reason to engage more deeply with the scope of Article 122 TFEU – have only been brought by private parties (Joined Cases T-530/22 to T-533/22; T-775/22; T-802/22; T-803/22; T-759/22). All such actions are expected to be dismissed for lack of standing (Article 263(3) TFEU).

However, in the case of SURE, the European Parliament brings the challenge. It enjoys privileged standing (Article 263(1) TFEU), so we can expect a judgment on the merits of its claim. The Court is thus called upon to steer the Commission back toward a restrictive application of Article 122 TFEU. This would not only correspond to the purpose of the provision but also to democratic standards.