Defense Procurement in Uncertain Times – Intended Differences between EU and EEA law?

European NATO member states are these days rebuilding and upgrading their military forces, equipment, and capabilities due to the Russia–Ukraine war and the second Trump administration’s stance toward NATO and the EU. For the NATO states in the EU or the EFTA-pillar of the European Economic Area, this rearmament primarily occurs through public procurement, governed either by the Classical Procurement Directive (2014/24/EU) or by the Defense and Security Procurement Directive (2009/81/EC). Both these directives are part of the EEA Agreement and the principle of homogeneity suggests that they should be interpreted in the same way under EU and EEA law. Due to differences in the derogation clauses found in the TFEU and the Main Part of the EEA Agreement, however, it is doubtful whether the reach of the two directives are the same under EEA law as in the EU.

Author: Postdoctoral fellow Kristian Strømsnes, University of Bergen

The derogation clauses in question are Article 346 TFEU and Article 123 EEA. Both provisions allow member states, in certain situations, to procure without regard to the procurement directives. The challenge is that the provisions are worded differently.

Both Article 346 TFEU and Article 123 EEA authorize member states to withhold information whose disclosure would be “contrary to the essential interests of its security” (lit. a, “the security exemption”). The wording is similar in both provisions and is unlikely to cause major interpretive issues.

The problem lies rather in “the arms exemption” (lit. b of both articles). According to Article 346 TFEU, a member state may take any measures “it considers necessary for the protection of the essential interests of its security”, provided the measures are “connected with the production of or trade in arms, munitions and war material”. Article 123 EEA allows for a similar derogation, but goes further by extending this to “other products indispensable for defense purposes or to research”, as well as other “development or production indispensable for defense purposes”. The difference between the two provisions is further extended by Article 346 TFEU limiting the derogation to products listed in the Council’s list of weapons from 15 April 1958. Article 123 makes no reference to the 1958 list.

There are thus clear differences between the arms exemptions in Article 123 EEA and Article 346 TFEU, with the former appearing, by its wording, to have a much broader scope of application.

Article 123 EEA appears to have been built not on the predecessor of Article 346 TEFU (Article 296 TEC/Article 223 TEEC), but rather on the free trade agreements in place between the EFTA States and the EEC at the time of  the EEA negotiations (see, e.g., Article 21 of the 1973 Agreement between the European Economic Community and the Kingdom of Norway). The wording can be traced further back to Article 18 of the 1960 EFTA Convention. The wording in art. 346 TFEU, on the other hand, can be traced back to the Treaty of Rome of 1957. The differences between the current Article 123 EEA and Article 346 TFEU must therefore have been known when the EEA Agreement was negotiated and concluded in the early 1990s. Put simply, the wording from the EFTA side was favored over that from the EU side. This cannot have been accidental.

Interestingly, also the more recent derogation clauses found in the EU’s Association Agreement with Andorra and San Marino 26 July 2024 (Article 102) as well as in the Trade and Cooperation Agreement between the EU and the United Kingdom (TCA) 30 December 2020 (Article 415), are worded more similarly to Article 18 of the EFTA Convention than to Article 346 TFEU. The EU does not seem to be pushing the wording from its own narrower derogation clause in negotiations with other countries.

Still, the EFTA Court has consistently held homogeneity between EU law and the EEA Agreement to be its guiding star in the interpretation of EEA law, even in cases where the provisions regulating a matter under EU and EEA law are not worded in exactly the same manner. In particular in cases where differences are the result of changes to the EU treaties not reflected in the (static) Main Part of the EEA Agreement, the EFTA Court has been prepared to go great lengths in order to achieve and maintain homogeneity (see cases such as E-25/15 Jabbi and E-4/19 Campbell). It is difficult, however, to apply this approach when the differences between Article 123 EEA and Article 346 TFEU was there from the very beginning and thus appear to be intentional.

The EFTA Court has found that compelling reasons may justify deviations from the goal of legal uniformity. Intended differences between EU law and the EEA Agreement may constitute such reasons, see for example E-4/04 Pedicel, the joined cases E-9 & -10/07 L’Oréal and E-1/16 Synnøve Finden AS.

The differences in wording may therefore suggest rather strongly that Article 123 EEA and Article 346 TFEU cannot be interpreted uniformly.

Such a conclusion, however, raises several hard questions. Can and should homogeneity nevertheless be achieved through the proportionality assessment required under both Article 123 EEA and Article 346 TFEU? Is it of relevance here that the mutual defense clause in Article 42 (7) TEU and the solidarity clause in Article 222 TFEU are not included in the EEA Agreement? Is it of relevance that the Defense and Security Procurement Directive (2009/81/EC) was incorporated into the EEA Agreement without any adaptions related to its references to Article 346 TFEU? If Article 123 EEA indeed gives the EFTA states more “room to manoeuvre” when it comes to defense procurement than EU member states have under Article 346 TFEU; can an EU member state respond in kind by invoking Article 123 EEA against a contractor from an EFTA state? Because EFTA states are not part of the EU’s defense and security cooperation? Or do the EFTA states, through the EEA Agreement, have such a special relationship with the EU that the result must be similar, after all?

Given the current geopolitical climate, and Norway’s interest in close cooperation with the EU in defense related matters also outside the scope of the EEA Agreement, these are all questions that needs to be addressed sooner rather than later.

---

How to cite

Strømsnes, Kristian (2025): Defense Procurement in Uncertain Times – Intended Differences between EU and EEA law? Blog. EFTA-Studies.org.