Case C-843/26, Ies and Atlas Aerospace – who may build Europe's weapons with Europe's loans?
The Union is lending Member States up to €150 billion to buy weapons together, on condition that the money stays out of the hands of companies controlled from outside Europe. Two references from Rome ask who decides which companies those are.
Facts
Council Regulation (EU) 2025/1106 established the Security Action for Europe (SAFE) instrument, under which the Union may lend Member States up to EUR 150 000 000 000 for common procurement of defence products. Article 16(3) requires that contractors and subcontractors “shall not be subject to control by a third country which is not an EEA EFTA State or Ukraine or by another third-country entity which is not established in the Union, in an EEA EFTA State or in Ukraine”. Article 16(5) provides a derogation: such an entity “may participate in the common procurement if it has been subject to screening within the meaning of Regulation (EU) 2019/452 and, where necessary, to appropriate mitigation measures, or if it provides guarantees verified by the Member State in which the contractor or subcontractor … is established”.
In a SAFE procurement conducted by the Italian Ministero della Difesa, IES Ingegneria Elettronica Sistemi Srl relied on the technical capacity and resources of ATLAS AEROSPACE, SIA (the suffix denotes a Latvian limited company) to meet a requirement in the tender rules — an arrangement permitted under Article 63 of Directive 2014/24/EU. The questions proceed on the basis that Atlas Aerospace falls within the third-country control rule and has obtained an investment authorisation from the government of another Member State following screening. The notice gives no further facts, and does not say what the ministry decided. The Tribunale Amministrativo Regionale per il Lazio has referred questions in two related cases: whether Article 16(3) reaches an entity that is neither contractor nor subcontractor but whose capacities a tenderer relies on (C‑843/26), and whether the Latvian authorisation binds the Italian ministry or leaves it free to object on grounds of essential national security (C‑843/26 and C‑845/26).
Questions Referred
1. Is Article 16(3) of Council Regulation (EU) 2025/1106 of 27 May 2025 (‘the SAFE Regulation’) to be interpreted as meaning that, in so far as it provides that economic operators subject to control by a third country other than an EEA EFTA State or Ukraine, or by a third-country entity not established in the Union, in an EEA EFTA State or in Ukraine, cannot participate, it also covers and applies to economic operators which, although they are neither ‘contractors’ nor ‘subcontractors’, have been called upon by a tenderer which lacks a specific technical requirement laid down in the tender rules to provide their technical capacity and human and/or material resources in accordance with Article 63 of Directive 2014/24/EU and Article 104 [of Legislative Decree] No 36/2023;
If the answer to the above question is in the affirmative, the following question is referred to the Court of Justice of the European Union:
2. Is Article 16(5) of the SAFE Regulation – in so far as it provides for a derogation from the exclusion rule laid down in Article 16(3) in favour of an economic operator which has been subject to screening within the meaning of Regulation (EU) 2019/452 and has obtained investment authorisation from the government of another Member State – to be interpreted as meaning that it is such that it is binding on the contracting authority which launched and conducts a SAFE procurement procedure, and cannot be contested by that authority, which should therefore merely take note of the authorisation granted by that other Member State when deciding whether to allow the economic operator concerned to participate in the procedure; — or, conversely: does that contracting authority nevertheless retain the power to object, giving reasons, to the participation in the procurement procedure of the undertaking to which the derogation in question applies, on grounds relating to the protection of its essential national defence and security interests, in the light of the principles deriving from Article 346(b) TFEU, Article 42 TEU, Article 4(2) TEU …
The question in C‑845/26 (Atlas Aerospace v Ministero della Difesa and Presidenza del Consiglio dei Ministri) is in the same terms as the second question above, and adds Article 1(2) and (3) of Regulation (EU) 2019/452, recital 17 and the second part of Article 16(5) of the SAFE Regulation to the provisions to be considered.
Sources
OJ notice C/2026/5057 (EUR‑Lex) · C‑845/26 (EUR‑Lex) · Case file on CURIA · Regulation (EU) 2025/1106 (SAFE) · Regulation (EU) 2019/452
Comment
These are the first references on SAFE, and they reach its central design choice: how to keep Union money away from foreign-controlled suppliers without shutting out every company with a foreign parent. Article 16 answers with a rule and an exit. The rule in paragraph 3 bars contractors and subcontractors controlled from outside the Union, the EEA EFTA States and Ukraine. The exit in paragraph 5 lets them in if they have been screened under the FDI Screening Regulation or have given guarantees verified by their Member State of establishment. Recital 17 explains the purpose: to permit participation “provided that strict conditions concerning the security and defence interests of the Union and its Member States are fulfilled”.
The first question asks whether the rule has a gap. Article 16(3) names “contractors and subcontractors”; it says nothing about an entity on whose capacities a tenderer relies under Article 63 of the Procurement Directive without that entity becoming a party to the contract. Read literally, a foreign-controlled firm could supply the very capability a defence contract needs by lending it to a European bidder. Read purposively, the provision would be pointless if it could be avoided that way, and the Court generally reads anti-circumvention provisions so that they cannot be. The Lazio court evidently sees the force of the purposive reading, since it asks the second question only if the answer to the first is yes.
The second question is the one with constitutional weight. Article 16(5) makes participation turn on a screening that another Member State carried out under its own FDI regime. If that clearance binds the buyer, one Member State’s assessment of a firm on its territory decides who may build equipment for another Member State’s armed forces. If it does not, the derogation is only as reliable as each contracting authority’s view of its own security, and the harmonised approach the Regulation aims at — Article 16(6) speaks of guarantees “based on a standardised template … to ensure a harmonised approach throughout the Union” — falls away. Italy’s position draws on Article 346(1)(b) TFEU, which lets a Member State take measures “it considers necessary for the protection of the essential interests of its security” in the arms trade, and on Article 4(2) TEU’s statement that national security “remains the sole responsibility of each Member State”. The Court reads the defence derogation narrowly: in Case C‑337/05, Commission v Italy (ECLI:EU:C:2008:203), on the purchase of military helicopters, it described the Treaty’s security derogations as dealing with “exceptional and clearly defined cases” and held that derogations from the procurement rules “must be interpreted strictly”. What it has not yet had to decide is how that derogation applies to a procurement funded and conditioned by Union law itself, where the Union has already laid down the security test.
The answer will matter well beyond this tender. SAFE procurements are under way across the Union, many involving suppliers with non-EU ownership, and every contracting authority needs to know whether a screening decision taken in another capital is the end of the inquiry or the start of its own.