Key Developments in the SAFE Regulation: Implementation Progress and Challenges

Since entering into force in late May 2025, the EU's Security Action for Europe (SAFE) Regulation, a €150 billion defence loan program, has rapidly transitioned from a legislative proposal to operational framework, marked by several significant developments.

1. Financial Allocation Framework

The European Commission has established a provisional allocation framework for the €150 billion loan facility, responding to substantial demand from 19 Member States whose collective requests exceeded the available budget.

Poland leads the allocation with over €43.7 billion, followed by Romania, France, and Hungary. Member States must now submit their comprehensive National Defence Investment Plans by November 30, 2025.

Following endorsement by the College of Commissioners, Member States must submit formal loan requests by November 30, 2025, accompanied by detailed investment plans specifying intended defence procurements and demonstrating compliance with SAFE eligibility criteria. Upon validation of the European Commission, a Council implementation decision will be proposed and must be adopted within four weeks.

Subsequently, the European Commission will negotiate individual loan agreements and operational arrangements with each Member State, establishing loan terms, disbursement schedules, and implementation frameworks. Pre-financing of up to 15% of the loan amount may be provided upon agreement signature, if requested.

The SAFE Regulation supports procurement of priority defence products organized into two distinct categories:

Category 1

• Ammunition and missiles
• Artillery systems, including deep precision strike capabilities
• Ground combat capabilities and their support systems, including soldier equipment and infantry weapons
• Small drones (NATO class 1) and related anti-drone systems
• Critical infrastructure protection
• Cyber
• Military mobility including counter-mobility

Category 2

• Air and missile defence systems
• Maritime surface and underwater capabilities
• Drones other than small drones (NATO class 2 and 3) and related anti-drone systems
• Strategic enablers such as, but not limited to, strategic airlift, air-to-air refuelling, C4ISTAR systems as well as space assets and services
• Space assets protection
• Artificial intelligence and electronic warfare

2. Institutional Challenge: European Parliament Legal Action

In August 2025, the European Parliament initiated proceedings against the Council at the Court of Justice of the European Union (CJEU), seeking annulment of the SAFE Regulation. This legal challenge does not oppose the program's objectives, which Parliament fully supports, but rather contests the procedural basis for its adoption. Parliament contends that the Commission's invocation of Article 122 TFEU's emergency clause to expedite the regulation was procedurally inappropriate and undermined democratic legitimacy by bypassing parliamentary involvement. The action requests that the CJEU maintain the regulation's operational status pending adoption of a replacement measure, ensuring continuity of funding flows.

3. Third-Country Participation and Political Complexities

The SAFE framework permits participation by non-EU countries, with both Turkey and South Korea having submitted formal participation requests to the European Commission. However, Turkey's application faces significant political obstacles, as Greek officials have indicated their intention to oppose its inclusion. Prime Minister Kyriakos Mitsotakis has stated that Greece will not support Turkey's participation while the "casus belli" declaration remains in effect. Third-country participation requires unanimous approval from all EU Member States.

These developments underscore both the rapid operationalization of the SAFE program and the complex political and institutional challenges accompanying its implementation. The forthcoming months will prove critical as Member States finalize their investment plans and the CJEU considers the parliamentary challenge.

4. Strategic Business Positioning Amid Regulatory Uncertainties

Notwithstanding ongoing legal proceedings and geopolitical tensions, businesses should adopt proactive strategies to capitalize on emerging SAFE procurement opportunities. The regulation remains fully operational, with Member States advancing their National Defence Investment Plans according to established timelines, ensuring procurement activities will proceed as scheduled.

Companies should establish systematic monitoring of contract notices across EU Member State procurement platforms and develop robust internal capabilities for rapid tender response. This encompasses technical competency development, strategic partnership formation, and comprehensive EU procurement compliance frameworks. Internal preparation should prioritize understanding specific requirements for Category 1 and Category 2 defence products as defined in the regulation.

Non-EU companies must carefully analyze the right of access provisions within the SAFE Regulation. While third-country participation is permitted, the unanimous Member State approval requirement introduces significant procedural complexity. Non-EU entities should conduct thorough eligibility assessments, evaluate EU partnership or subsidiary establishment options, and monitor closely the outcomes of current participation requests from Turkey and South Korea, which may establish important precedents for future third-country applications.