1 November 2024

The Impact of the European Defence Fund on Cooperation with Third-country Entities

Tim Lawrenson & Ester Sabatino

The European Defence Fund (EDF) is the European Union’s flagship defence-industrial instrument. Launched in 2021, the EDF is intended to support European defence R&D by providing funding to EU companies and research organisations (‘legal entities’) that assemble in multinational consortia to cooperate on capability-development projects.

It provides significant funding. The EDF’s EUR8bn budget over the period 2021–27 accounts for around 15% of all EU defence R&D spending, which means that the European Commission is the third-largest funder of defence R&D in the EU, with only France and Germany spending more.

When the EDF’s rules were being developed, the most contentious issue was how to deal with the participation of non-EU or ‘third country’ entities in EDF projects. Ultimately, it was decided that the EDF should allow some third-country involvement, but only if strict rules and conditions were met.

However, IISS research indicates that while there has been some participation in the EDF by EU-based companies owned by entities in third countries, there is no cooperation with entities located outside the EU (the latter being referred to as ‘true third-country entities’ throughout this study).


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