Military build-up in a new geopolitical situation

Increased focus on military build-up in a new geopolitical situation

Denmark and Europe are in the middle of the biggest military build-up in recent times. According to analyses from the Danish Defence Intelligence Service, Russia will be able to pose a credible threat to one or several NATO countries in the Baltic Sea region in about two years if the war in Ukraine comes to an end or reaches a standstill and the United States does not get involved. This puts pressure on the need for quick military build-up in Denmark and Europe.

In addition to a significant increase in demand in the defence and security equipment market, the need for quick military build-up is also challenged by the EU legal framework that usually applies to procurement and production of defence equipment. There are many requirements and processes under EU law that are time-consuming to comply with and that may pose a challenge for authorities to observe if they are to build up the military in time. One example is the procurement law rules.

The time-critical aspect of quick military build-up in Europe has highlighted Member States’ need to be able to apply Article 346 TFEU. The provision is a general exemption in EU law allowing Member States, under strict conditions, to derogate from all other EU law on the grounds of the Member States' essential national security interests.

The Commission is also very aware of the Member States’ need to use Article 346 TFEU and last week, the Commission addressed this point in their communication Defence Readiness Omnibus.

The ultimate crisis provision of EU law

Article 346 TFEU contains two possible exemptions based on Member States' essential security interests.

The first exemption can be found in subsection (1), para (a), which allows national authorities to withhold information that the authority would otherwise be obliged to share under EU law if it is contrary to the Member State's essential security interests. The provision of para (a) concerns the protection of information in general in order not to harm Member States' essential security interests, which is why it is not restricted to the areas of arms, munitions and war material as is the case for the second exemption in subsection (1), para (b).

Article 346(1), para (b), TFEU contains a number of cumulative conditions that must be met in order for the provision to apply: 

1) the measure must be justified on the grounds of essential security interests;
2) the measure must be connected with the production of or trade in arms, munitions and war material;
3) it must be necessary to derogate from the rules of the Treaty so that less extensive measures could not have been used (proportionality); and
4) the measure may not adversely affect the conditions of competition in the internal market regarding civilian goods.

The case law of the Court of Justice of the European Union is limited, and many questions and complex questions may arise about the scope and application of the provision in practice. First and foremost, there is the question of which "measures" that are covered by the scope of application of the provision.

Traditionally, the provision has been used in situations where the contracting authority has needed to derogate from the usual procurement rules, but the provision is not restricted to this. There is also the question of the scope of the proportionality assessment (see the word "necessary" in the provision) and the handling of the so-called dual use goods that have both military but perhaps primarily civilian use as military and civil technologies cannot necessarily be viewed separately. Finally, it is possible to carry out a competitive process under the exemption which in practice may pose challenges for the contracting authority.

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Defence and security present complex challenges and require advisors with special knowledge. As specialist defence and security attorneys, we have extensive experience in advising on the special challenges in this area.

For example, do you work for an authority responsible for aspects of Denmark's defence or security or a public enterprise that owns or operates infrastructure or other security-critical activities? Are you unsure about whether a product is "dual use" or not, or are you just unsure about the situations where an authority may make a direct award outside of the usual rules? Are you unsure about whether a specific measure or activity may be fully or partially covered by the exemptions of Article 346 TFEU or other security exemptions in the treaties? Our specialists are ready to help you!

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