The Canadian government recently announced a new strategic partnership with the European Union (EU). These announcements underscore Canada's commitment to defence-related investments and the need to persify its strategic relationships, particularly in light of ongoing trade tensions with the United States.
In this article, we highlight the features of the Canada-EU Security and Defence Partnership, including Canada's participation in Security Action for Europe (SAFE) and ReArm Europe Plan/Readiness 2030, and what this means for defence procurement going forward.
Recent developments: A new strategic partnership for Canada and the EU
On June 23, 2025, Canada and the EU announced the "The New EU-Canada Strategic Partnership of the Future," which aims to strengthen existing relationships between Canada and the EU.1 The announcement serves as the first step in a series of comprehensive negotiations on various areas of cooperation, including:
- increasing transatlantic security through a new era of EU-Canada security and defence cooperation, including the full implementation of the EU-Canada Security and Defence Partnership;
- increasing trade flows and promoting economic security;
- fostering competitiveness and resilience through strengthened cooperation in strategic value chains;
- deepening regulatory alignment;
- shaping the digital transition and promoting exchanges in education and innovation for technologies of the future;
- fighting climate change and environmental degradation and facilitating the transition to climate neutrality;
- establishing crisis management strategies; and
- exploring cooperation of justice and home affairs.2
Coincident with the joint statement, Canada and the EU signed the Security and Defence Partnership,3 which focuses on building a framework for dialogue and co-operation in security and defence priorities.4 In particular, the partnership has identified several areas of cooperation, including international peace and crisis management, defence initiatives, capacity-building for partners in security and defence, and enhanced cooperation on security-related issues such as cyber security, maritime security, and space security.5
The Security and Defence Partnership will act as the launchpad for defence procurement cooperation between Canada and the EU, including Canada's participation in Security Action for Europe (SAFE) under the ReArm Europe Plan/Readiness 2030.6 These initiatives are discussed below.
(a) ReArm Europe Plan/Readiness 2030
In March 2025, the European Commission announced its "ReArm Europe Plan/Readiness 2030."7 This plan outlines the EU's strategy to leverage defence investments and capabilities, which includes a dedicated loan instrument for joint procurements (i.e., SAFE). The plan focuses on seven priority areas of investment, including:
- air and missile defence;
- artillery systems;
- missiles and ammunition;
- drones and anti-drone systems;
- strategic enablers and critical infrastructure protection, including in relation to space;
- military mobility; and
- cyber, artificial intelligence and electronic warfare.8
The ReArm Europe Plan/Readiness 2030 will serve as the roadmap for breaking down national barriers, prioritizing EU-made weapons, and pooling procurement and financial resources.9 By entering into negotiations with the EU under the Security and Defence Partnership, Canada is positioning itself as an important partner in defence cooperation and, in particular, creating a pathway for Canadian participation in procurement opportunities under the SAFE initiative, discussed below.
(b) Security Action for Europe (SAFE) – A new EU defence funding tool
The Security Action for Europe (SAFE) was announced by the EU on May 27, 2025.10 At a high level, SAFE serves as a financial loan instrument proposed under the ReArm Europe Plan/Readiness 2030 to support investments in defence industrial production.
There are two notable features of SAFE. The first is the "European Preference Clause." This means that, in order for EU Member States to qualify for funding under SAFE, no more that 35% of the value of the weapon system being acquired can originate outside of the EU, Ukraine, or in a European Economic Area (EEA)/European Free Trade Association (EFTA) country.11 Put differently, for the procurement of defence products, 65% of the value of the procurement contract must derive from the EU or an approved non-EU country. This is further reflected in other provisions under the new Council Regulation for SAFE, wherein additional geographic parameters for contractors and subcontractors are specified (e.g., the location of infrastructure, facilities, assets and resources of the contractors and subcontractors).12
The second feature relates to joint procurements. In an effort to ensure interoperability and efficient use of resources, a minimum of two participating countries will be required to undertake defence procurements jointly (referred to as "common procurements"). Under the SAFE Regulation, a "common procurement" refers to the procurement of defence products or other products for defence purposes that is benefiting from funding assistance under the SAFE instrument and carried out by :
- at least two EU Member States;
- at least one EU Member State and Ukraine; or
- at least one EU Member State and an EEA/EFTA country.13
Notwithstanding, subject to urgency and the current geopolitical environment, the SAFE instrument may still be used for inpidual procurements involving only one EU Member State.
Under the SAFE Regulation, common procurements supported by the SAFE instrument may also include non-EU countries (i.e., acceding countries, candidate countries and potential candidates, and other third countries with whom the Union has entered a Security and Defence Partnership).14 However, these countries will not be eligible for loans under SAFE and may be required to provide their own form of financial contributions.15
As a party to the Security and Defence Partnership, Canada would be eligible to participate with EU Member States in common procurements under the SAFE instrument. However, Canada would not be able to receive funding under the SAFE instrument.
It is also worth noting that the SAFE Regulation provides that the EU can enter into bilateral or multilateral agreements with third-party countries under an existing Security and Defence Partnership in order to expand on certain eligibility conditions, including:
- the conditions and modalities of participation of contractors and subcontractors established in the third country in the common procurement under the SAFE instrument, including the conditions on the location of the executive management structures and on control by third countries or third-country entities;
- the rules related to the location of the infrastructure, facilities, assets and resources of the contractors or subcontractors involved in the common procurement which are used for production of defence products or other products for defence purposes supplied under the contracts resulting from common procurements under the SAFE instrument;
- the rules related to the cost of components originating in the third country, including a minimum share of components originating either in the Union, an EEA EFTA country or Ukraine and a maximum share of components originating neither in the Union, an EEA EFTA country or Ukraine or third-country party to the agreement; and/or
- the rules related to restrictions imposed by third countries that are not parties to the agreement or by entities established on their territory, on the definition, adaptation and evolution of the design of the defence product procured with the support of the SAFE instrument.16
The inclusion of any of these revised conditions or rules in a bilateral or multilateral agreement between Canada and the EU would open eligibility criteria for Canadian defence contractors, who would otherwise need to navigate the restrictions imposed by the preferences in favour of EU Member States.
What this SAFE instrument means for Canada is twofold. First, Canada stands to benefit from greater access to defence resources by joining common procurements with EU Member States, which effectively creates an international "buying group" arrangement.
Second, Canadian vendors are still eligible to participate in defence procurements issued under SAFE. However, in the absence of a bilateral or multilateral agreement, the geographic restriction imposed under the SAFE Regulation may limit or impact the ability for Canadian defence contractors to participate. Moreover, it remains unclear whether the "European Preference Clause" is a mandatory threshold or whether the distribution would shift if Canada was a party to a common procurement.
Going forward
The Canada-EU partnership illustrates a cooperative path forward for defence and security. More importantly, it provides Canada with the capacity to accelerate defence spending and meet its NATO investment commitments under the Defence Investment Pledge.17 This opportunity is increasingly significant as it would enable Canada to persify its defence resources and move away from its current reliance on American suppliers, noting that a significant portion of Canadian defence capital currently flows to the U.S.18 These measures are also encouraging for Canadian defence contractors, as it may provide a new stream of potential opportunities and international collaboration.
It is worth noting that the signed partnership is a framework, not a finalized procurement deal. As such, Canada must still negotiate detailed terms of its participation in SAFE (i.e., bilateral or multilateral agreements) and complete legal, regulatory, and trade steps before firms can begin bidding.
The formalization of the Canada-EU procurement deal will likely require establishing an administrative arrangement between Canada and the European Defence Agency,19 which may include a separate trade or defence agreement. At present, Canada and the EU are signatories to the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), which includes certain carve-outs for defence procurement under Annex 19-4 and Annex 19-5. It is unclear whether the formal arrangement will require amendments to CETA or a brand-new agreement, and how long these negotiations and ratification procedures will take.
These changes will not occur overnight. The legal landscape and implications of the Canada-EU partnership is still evolving, therefore much remains to be seen in terms of the practical outcomes for defence procurement for Canada. That being said, this partnership is an encouraging first step in building Canada's international profile in defence and security investments.
We continue to monitor ongoing developments. For assistance in determining how these changes may impact or benefit your organization, please contact one of the authors.
Footnotes
1. European Union, Statement: "Joint Statement following the European Union - Canada 2025 Summit: Enduring Partnership, Ambitious Agenda," published online on June 22, 2025. [Joint Statement]
2. Ibid at"Annex – The New EU-Canada Strategic Partnership of the Future."
3. Government of Canada, Security and Defence Partnership Between the European Union and Canada, published online on June 23, 2025. [Security and Defence Partnership]
4. Prime Minister of Canada, News Release: "Canada announces new, strengthened partnership with the European Union," published online on June 23, 2025.
5. Security and Defence Partnership, supra note 3.
6. Joint Statement, supra note 1.
7. European Parliament, Briefing: "ReArm Europe Plan/Readiness 2030," publishing online in April 2025. [EU Briefing Note]
8. European Commission, "Questions and answers on ReArm Europe Plan/Readiness 2030," published online on March 18, 2025. [EU Q&A]
9. EU Briefing Note, supra note 7.
10. European Union, Press Release: "SAFE: Council adopts €150 billion boost for joint procurement on European security and defence," published online on May 27, 2025.
11. The EEA consists of Iceland, Liechtenstein and Norway; the EFTA includes these three countries plus Switzerland.
12. EU, Council Regulation 2025/1106 of 27 May 2025 establishing the Security Action for Europe (SAFE) through the Reinforcement of the European Defence Industry Instrument, [2025] OJ, L 2025/1106, at Article 16. [SAFE Regulation]
13. SAFE Regulation, supra note 12 at Article 2.
14. Ibid.
15. EU Q&A, supra note 7; SAFE Regulation, supra note 12 at Article 17,
16. SAFE Regulation, supra note 12 at Article 17.
17. Prime Minister of Canada, News Release: "Canada joins new NATO Defence Investment Pledge," published online on June 25, 2025.
18. James Pierlot, "Where's the economic calculus in Canada's bold new defence pivot?" The Globe and Mail, published online June 24, 2025, updated June 26, 2025.
19. Joint Statement, supra note 1.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
