What changed between the plenary report and the adopted text

Added:(14) The current legal framework for the implementation of the EDF limits the use of indirect management to exceptional cases. However, to facilitate faster and leaner innovation cycles which would enable the EDF to respond more effectively to emerging defence needs and technological advancements, and for a more cost-efficient implementation of the EDF, a more flexible use of indirect management could be necessary. Therefore, it is necessary to introduce the possibility to use indirect management in a more flexible manner, while ensuring that the principles of sound financial management, transparency and accountability are complied with, and that the use of indirect management is subject to rigorous monitoring and evaluation to guarantee the optimal use of Union funds. The evaluation and award procedures are carried out in accordance with Regulation (EU) 2021/697, as amended by this Regulation, and Regulation (EU, Euratom) 2024/2509 of the European Parliament and of the Council, regardless of whether they are conducted under direct or indirect management.

Removed:(6a) The Defence Readiness Roadmap 2030, including the priority capability coalitions, the four flagship projects and the actions to support Ukraine, proposes urgent actions that are essential in order to strengthening Europe’s defence capabilities and to effectively adress a broad spectrum of threats, including hybrid operations, Russia’s shadow fleet and the risk of armed aggression. The European Defence Fund should contribute to the implementation and achievement of the objectives set out in these urgent actions, thereby reinforcing the Union’s strategic autonomy and resilience in the face of evolving security challenges.

Added:(15) Due to the rapidly evolving strategic context, in particular as a result of Russia’s war of aggression against Ukraine, accelerating the technological transformation of European defence is crucial. Ukraine's defence ecosystem has proved to be innovative, resilient and cost-effective in many relevant aspects of defence technologies. It would be of particular value for the EDTIB to benefit from this experience and know-how and to exchange best practices to improve its innovation capacity. Strengthening the collaboration between Union recipients and Ukrainian entities through targeted actions could significantly contribute to that endeavour. Such collaboration can in particular provide possibilities that are not readily available within the Union, such as rapidly available results, 24-hour testing and testing under realistic operational conditions. It can also significantly enhance the development and validation of defence technologies and products and can facilitate the incorporation of realistic scenarios into the further development of defence technologies and products, thereby ensuring a technical and strategic advantage for the EDTIB. By allowing costs of testing activities carried out in Ukraine to be eligible for funding, the EDF would be able to support the development of more effective and innovative defence solutions, ultimately contributing to the enhancement of the Union's defence capabilities. The costs of such testing activities should only be eligible for funding as far as necessary for meeting the specific objectives of the EDF set out in Article 3(2) of Regulation (EU) 2021/697.

Removed:(6b) Defence readiness also relies on secure, affordable and resilient access to energy. Energy infrastructure, including low-carbon energy sources, is a key enabler of industrial and operational resilience. The European Defence Technological and Industrial Base (EDTIB) should therefore be reinforced by ensuring reliable access to energy, the diversification of supply sources, and the deployment of clean and efficient technologies, to enhance the self-sufficiency of defence-related facilities. Strengthening defence readiness also requires reducing dependencies on external suppliers for critical raw materials.

Added:(16) The interim evaluation of the EDF has shown that the current award criteria for the evaluation of proposals under the EDF are overly complex, unclear and difficult to apply in practice. This has resulted in unnecessary administrative burden and uncertainties for the Commission and the applicants, ultimately hindering the efficient implementation of the EDF. It is necessary to simplify the award criteria and introduce more flexibility in their application in order to make the evaluation more efficient, transparent and effective. In line with an excellence-based approach to defence research and development, proposals should be assessed at least on the basis of excellence in the defence domain and potential with regard to innovation, with due consideration of operational relevance and added value to the Union, as well as on the basis of an evaluation of the quality and efficiency of the implementation of the actions. The possibility to select a relevant subset of award criteria according to the specific objectives of each call for proposals on a call-by-call basis, would allow for a tailored and focused evaluation thus enabling a better alignment with the priorities and objectives of the EDF. In order to facilitate the preparation of applications, the use of subsets of criteria and their respective weight should be specified clearly and transparently in each call for proposals. To ensure transparency, each call topic under a call for proposals should include the same set of award criteria that is displayed within the call for proposals of the annual work programme.

Removed:(7) The report on the interim evaluation of the European Defence Fund (EDF), established by Regulation (EU) 2021/697 of the European Parliament and of the Council, has confirmed its overall effectiveness and relevance, while highlighting the need to further streamline procedures and reduce administrative burdens where possible and introduce clarification, simplification and flexibility in that Regulation in order to facilitate the implementation of the EDF. Regulation (EU) 2021/697 should therefore be amended, taking into account the experience gained since 2021 and the feedback received during the consultations carried out in the context of the interim evaluation of the EDF. To ensure a genuinely competitive and inclusive European defence industrial base, the participation of small and medium-sized enterprises (SMEs) and small mid-caps (SMCs) across all Member States should be facilitated and promoted. The administrative burden linked to participation in the European Defence Fund should be further reduced, and procedures should be simplified in practice. Specific attention should be given to cross-border SMEs and SMCs to ensure fair and equitable access to calls for proposals throughout the Union.

Added:(17) The implementation of the EDF has been hindered by the requirement to adopt annual work programmes, resulting in complex procedures, making it challenging to ensure predictability and continuity of the actions supported by the EDF. To address that issue and provide more flexibility in the management of the EDF, it is necessary to introduce the possibility to implement the EDF through annual or multi-annual work programmes. This would enable the Commission to better plan and coordinate support for defence research and development activities, while also allowing for more efficient use of resources and improved synergies between different projects and initiatives. By allowing multi-annual work programmes, the EDF would be able to better support long-term research and development projects, foster collaboration among stakeholders, and ultimately contribute to the enhancement of the Union's defence capabilities. Due to the changed geopolitical landscape, particular attention should be paid to actions contributing to addressing the needs of Member States and associated countries with the highest exposure to conventional military threats.

Removed:(8) The current legal framework for the EDF implementation limits the use of indirect management to exceptional cases. However, to facilitate faster and leaner innovation cycles, enabling the EDF to respond more effectively to emerging defence needs and technological advancements and for a more cost-efficient implementation of the EDF, a more flexible use of indirect management may be necessary. Therefore, it is necessary to introduce the possibility to use indirect management in a more flexible manner, while ensuring that the principles of sound financial management, transparency and accountability are maintained, and that the use of indirect management is subject to rigorous monitoring and evaluation to guarantee the optimal use of Union funds.

Added:(18) In order to further improve the efficiency and effectiveness of the EDF, it is essential to provide the Commission with the necessary flexibility to manage the EDF in a way that optimises the use of resources and minimises administrative burden. To that end, the conditions under which the Commission may exceptionally have recourse to direct awards should be clarified, allowing for a more streamlined and expedited procedure in certain circumstances, which are clear and deemed relevant for the purpose of the call topic. Continuity of efforts and efficient implementation of defence research and development projects should be facilitated, while respecting an excellence-based approach, and the principles of transparency, fairness, and equal treatment. The Commission should be enabled to better respond to the evolving needs of the defence sector, the cooperation between stakeholders should be fostered and the development of innovative and effective defence solutions should be improved, thereby enhancing the security of the Union and defence capabilities of the Member States.

Removed:(9) The requirement that all infrastructure, facilities, assets and resources used for the implementation of EDF funded projects be located within the Union and associated countries territory to be eligible for funding limits the potential for the European Defence Technological and Industrial Base to benefit from testing opportunities that offer unique advantages. To address this limitation, it is necessary to allow for the costs of carrying out testing activities in third countries, namely Ukraine, to be eligible for EDF funding. Testing in Ukraine provides possibilities that are not readily available within the Union, such as rapidly available results, 24-hour testing and testing on the battlefield, which can significantly enhance the development and validation of defence technologies and products. In addition, testing in Ukraine can facilitate the incorporation of live experience on modern warfare into the further development of defence technologies and products, thereby ensuring a technical and strategic advantage for the European Defence Technological and Industrial Base. By allowing costs of testing activities carried outside the Union territory to be eligible for funding, the EDF would be able to support the development of more effective and innovative defence solutions, ultimately contributing to the enhancement of the Union's defence capabilities.

Added:(19) The EDF has the potential to boost the development of innovative defence technologies and solutions through pre-commercial procurement. However, the current legal framework is overly complex and lacks clarity on the conditions for pre-commercial procurement under the EDF, thus hindering its effective use. The conditions for pre-commercial procurement need to be simplified and clarified, as the current provisions promote the award of multiple contracts within the same procedure (multiple sourcing), which is not always suitable for the defence sector. Removing that restriction is expected to provide a clearer and more effective pre-commercial procurement framework, enabling the EDF to better support the development of innovative solutions, bridge the gap between research and market deployment, and provide a strong incentive for Member States to invest in defence research and development.

Removed:(10) The interim evaluation of the EDF has shown that the current award criteria for the evaluation of proposals under that Fund are overly complex, unclear, and difficult to apply in practice. This has resulted in unnecessary administrative burdens and uncertainties for the Commission and the applicants, ultimately hindering the efficient implementation of the EDF. It is necessary to simplify the award criteria and introduce more flexibility in their application in order to make the evaluation more efficient, transparent, and effective. In line with an excellence-based approach to defence research and development, proposals should be selected primarily on the basis of scientific and technical excellence and potential with regard to innovation, with due consideration of operational relevance and added value to the Union, as well as on the basis of an evaluation of the quality and efficiency of the implementation of the actions. The possibility to select a relevant subset of award criteria according to specific objectives of the calls for proposals would allow for a tailored and focused evaluation thus for a better alignment with the priorities and objectives of the EDF. In order to facilitate the preparation of applications, the use of subsets of criteria and their respective weight should be specified clearly and transparently in each call.for proposals.

Added:(20) The current legal framework for the EDF has not provided sufficient access rights to the results of development projects to Member States, in particular for those co-financing such projects. To ease that concern and promote a more collaborative and cooperative approach to defence research and development, it is necessary to grant to the co-financing Member States the right to access the results of development projects on fair terms. Such access rights should be strictly limited to enabling the relevant national authorities to assess the results of the action and to assess their potential use for public defence planning and capability development. Those access rights should not entail any transfer of ownership of any intellectual property rights (IPRs) or know-how and should be limited to non-commercial and non-competitive use. In addition, where Member States or EDF-associated countries have confirmed co-financing to some legal entities of a consortium, nothing in Regulation (EU) 2021/697 prevents legal entities of the selected consortium from providing such Member States or EDF-associated countries with rights to use or to have used the results generated during the action, including for certification, testing, and integration in national systems as well as for other defence purposes, to be agreed upon between the Member States or EDF-associated countries and the legal entities of the selected consortium. The conditions for the exercise of such access rights should be defined in the contractual relationship between the recipients and the national authorities co-financing the action. This aims to improve transparency and ease the negotiation process between the Member States and industry and facilitate the decision-making process. As a result, this is expected to promote a more streamlined collaboration in defence research and development.

Removed:(10a) Artificial intelligence (AI) is a key aspect of the competitiveness, innovation and strategic autonomy of the EDTIB. Enhancing the role of AI within the EDTIB will contribute to more efficient decision-making, improved interoperability and strengthened technological leadership. In the implementation of the European Defence Fund, the Commission should foster trustworthy, human-centred and secure AI applications for defence purposes, in line with Union law and ethical principles.

Added:(21) The eligibility of costs related to testing activities in Ukraine can improve the efficiency and effectiveness of the projects funded under the EDF. To maximise the benefits of the amendments to Regulation (EU) 2021/697, the amendment to that Regulation related to the eligibility of those costs should apply retroactively as of 1 January 2025.

Removed:(11) The implementation of the EDF has been hindered by the requirement to adopt annual work programmes, resulting in complex procedures, making it challenging to ensure predictability and continuity of the actions supported by the EDF. To address that issue and provide more flexibility in the management of the EDF, it is necessary to introduce the possibility to implement the EDF through annual or multi-annual work programmes. This would enable the Commission to better plan and coordinate the support for defence research and development activities, while also allowing for more efficient use of resources and improved synergies between different projects and initiatives. By allowing multi-annual work programmes, the Fund would be able to better support long-term research and development projects, foster collaboration among stakeholders, and ultimately contribute to the enhancement of the Union's defence capabilities. Due to the changed geopolitical landscape, particular attention should be paid to actions contributing to addressing the needs of Member States and associated countries with the highest exposure to conventional military threats.

Added:(22) Since the objectives of this Regulation, namely to support defence readiness, to facilitate investments in defence and to improve conditions for the defence industry, cannot be sufficiently achieved by the Member States, but can rather be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives.

Removed:(12) In order to further improve the efficiency and effectiveness of the EDF, it is essential to provide the Commission with the necessary flexibility to manage the programme in a way that optimises the use of resources and minimises administrative burdens. To that end, the conditions under which the Commission may exceptionally have recourse to direct awards should be clarified, allowing for a more streamlined and expedited procedure for research and development actions that have previously received Member State or Union funding following competitive calls for proposals ▌. Continuity of efforts and efficient implementation of defence research and development projects should be facilitated, while respecting the principles of excellence, transparency, fairness, and equal treatment. The Commission should be enabled to better respond to the evolving needs of the defence sector, the cooperation between stakeholders should be fostered and the development of innovative and effective defence solutions should be improved, thereby enhancing the security of the Union and defence capabilities of the Member States.

Removed:(13) The EDF has the potential to boost the development of innovative defence technologies and solutions through pre-commercial procurement. However, the current legal framework is overly complex and lacks clarity on the conditions for pre-commercial procurement under the EDF, thus hindering its effective use. The conditions for pre-commercial procurement need to be simplified and clarified, as the current provisions promote the award of multiple contracts within the same procedure (multiple sourcing), which is not always suitable for the defence sector. Removing this restriction will provide for a clearer and more effective pre-commercial procurement framework, enabling the EDF to better support the development of innovative solutions, bridge the gap between research and market deployment, and provide a strong incentive for Member States to invest in defence research and development.

Removed:▌

Removed:(15) To maximise the benefits of the changes to Regulation (EU) 2021/697, the amendments to that Regulation should apply retroactively. While some provisions, such as those relating to the award criteria cannot be applied retroactively due to their very nature, others, such as those relating to funding rates or testing outside of the territory of the Union, can improve the efficiency and efficacy of the projects funded under the EDF. To ensure that Union funds are spent in the most effective way possible, these provisions should be applicable as of 1 January 2025.

(23) Regulations (EC) No 1907/2006, (EC) No 1272/2008, (EU) No 528/2012, (EU) 2019/1021 and (EU) 2021/697 should therefore be amended accordingly,

HAVE ADOPTED THIS REGULATION:

Change 10

Added:Article 1 Amendment to Regulation (EC) No 1907/2006

In Article 2 of Regulation (EC) No 1907/2006, paragraph 3 is replaced by the following:

Change 11

Changed:‘3. Member States may allow for exemptions from this Regulation for substances, on their own, in a mixture or in an article, where necessary in the interests of defence.defence.’.

Change 12

Removed:3a. Where substances, on their own, in a mixture or in an article, are used for both, defence and non-defence purposes, any exemption granted under paragraph 3 of this Article shall apply only to the uses in defence applications.

Added:Article 2 Amendment to Regulation (EC) No 1272/2008

Removed:3b. By way of derogation from paragraph 3a, where defence and non-defence production take place on a common production line which has been shown to the national competent authority, to be technically non-separable due to objective technical constraints or that it cannot be operated in batches, the exemption granted under paragraph 3 may, where necessary in the interests of defence, be extended to the entire output of that production line without prejudice to the application of Articles 60, 67 and of Annex XVII to products placed on the market for supply to the general public. Any such extension of the exemption shall be supported by a justification containing detailed technical documentation demonstrating that the physical separation of production lines or that operation in separate batches is not technically possible and that the extension is required in the interests of defence, drawn up, where relevant, in accordance with the applicable national rules.

Removed:Any extension of the exemption granted under first subparagraph of this paragraph shall not apply to substances which are or have to be classified in accordance with Regulation (EC) No 1272/2008, as carcinogenic category 1A, carcinogenic category 1B, or toxic for reproduction category 1A.

Removed:Any extension of the exemption granted under first subparagraph of this paragraph may be limited in time and shall be subject to a regular review, including a review before renewal of that exemption where applicable.

Removed:Within five years from the date of application of this Regulation, the Commission shall assess the implementation of provisions laid down in paragraphs 3 to 3c of this Article in particular their effects on the functioning of the internal market and on the level of protection of health and the environment under this Regulation and shall report to the European Parliament and the Council.

Removed:3c. Where defence needs require a production line ordinarily dedicated to non-defence applications to be temporarily repurposed for defence manufacturing only, the exemption referred to in paragraph 3 of this Article shall apply for as long as the line is repurposed for defence production only, in line with the period and scope notified to the competent authority.

Removed:3d. The Commission may, in consultation with Member States and relevant stakeholders, develop guidelines on the practical implementation of the provisions of paragraph 3.’

In Article 1 of Regulation (EC) No 1272/2008, paragraph 4 is replaced by the following:

Change 13

Changed:‘4. Member States may allow for exemptions from this Regulation for substances,substances and mixtures, andas well as articles referred to in section 2.1 of Annex I, where necessary in the interests of defence.defence.’.

Change 14

Removed:4a. Where substances, mixtures, and articles referred to in section 2.1 of Annex I, are used for both, defence and non-defence purposes, any exemption granted under paragraph 4 of this Article shall apply only to the uses in defence applications, without prejudice to the application of this Regulation to other uses.

Added:Article 3 Amendment to Regulation (EU) No 528/2012

Removed:4b. Where defence needs require a production line ordinarily dedicated to non-defence applications to be temporarily repurposed for defence manufacturing only, the exemption referred to in paragraph 4 of this Article shall apply for as long as the line is repurposed for defence production only, in line with the period and scope notified to the competent authority.

Removed:4c. The Commission may, in consultation with Member States and relevant stakeholders, develop guidelines on the practical implementation of the provisions of paragraph 4, in a manner consistent with any Commission guidelines referred to in Article 2(3c) of Regulation (EC) No 1907/2006.’

In Article 2 of Regulation (EU) No 528/2012, paragraph 8 is replaced by the following:

Change 15

Changed:‘8. Member States may allow for exemptions from this Regulation for biocidal products, on their own or in a treated article, where necessary in the interests of defence.defence.’.

Change 16

Removed:8a. Where biocidal products, on their own or in a treated article, are used for both, defence and non-defence purposes, any exemption granted under paragraph 8 of this Article shall apply only to the uses in defence applications, without prejudice to the application of this Regulation to other uses.

Added:Article 4 Amendments to Regulation (EU) 2019/1021

Removed:8b. Where defence needs require a production line ordinarily dedicated to non-defence applications to be temporarily repurposed for defence manufacturing only, the exemption referred to in paragraph 8 of this Article shall apply for as long as the line is repurposed for defence production only, in line with the period and scope notified to the competent authority.

Removed:8c. The Commission may, in consultation with Member States and relevant stakeholders, develop guidelines on the practical implementation of the provisions of paragraph 8, in a manner consistent with any Commission guidelines referred to in Article 2(3c) of Regulation (EC) No 1907/2006.’

Regulation (EU) 2019/1021 is amended as follows:

Change 17

Changed:(1) in Article 2, the following point (14) is added:

Change 18

Changed:‘(14) ‘defence readiness’ means the state of preparedness of a Member State or several Member States to respond to a crisis as defined in Article 1, point (10), of Directive 2009/81/EC of the European Parliament and of the Council*, which relates to defence’;defence;

_________

* Directive 2009/81/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security, and amending Directives 2004/17/EC and 2004/18/EC (OJ L 216, 20.8.2009, p. 76, ELI: http://data.europa.eu/eli/dir/2009/81/oj).’;

Change 19

Changed:(2) in Article 3, the following paragraph (4a) is inserted:

Change 20

Changed:‘4a. When collecting, assessing and submitting information related to socio-economic considerations pursuant to Annex F ofto the Convention for the purpose of the risk management evaluation referred to in Article 8(7) and▌ Articleand 8(8)(8) of the Convention, the Commission and Member States shall duly take into account defence readiness and specificities of the defence sector, including impactsimpact on defence production supply chains;chains.’;

Change 21

Changed:(3) in Article 13(1)13(1), the following second subparagraph is added:

Change 22

Changed:‘Where necessary, Member States may make exemptions from this article on grounds of protection of nationalUnion or Unionnational defence interests,interests for the purpose of protecting sensitive information provided that such exemptions do not undermine the UnionUnion’s or Member StatesStates’ compliance, where relevant, with their reporting obligations under the Convention’.Convention.’.

Change 23

Added:Article 5 Amendments to Regulation (EU) 2021/697

Regulation (EU) 2021/697 is amended as follows:

(1) Article 2 is amended as follows:

Change 24

Changed:(a) the following point (6a) is inserted:

Change 25

Changed:‘(6a) ‘cross-border“cross-border SMEs’SMEs” means SMEs which are established in Member States or associated countries other than those wherein thewhich legalrecipients entitiesthat cooperatingare withinnot aSMEs consortium▌ are established and which areparticipate notin SMEsthe activity as recipients, subcontractors or mid-capsother arelegal established;’;entities in the supply chain;’;