Entering the defence sector: legal and regulatory hurdles for new entrants

A recent article published jointly by L’Echo and De Tijd[1] about a poll organised by Agoria[2] highlighted a striking paradox in Belgium’s defence industrial landscape. Despite significant political momentum and new financial instruments being mobilised at both national and EU levels, many Belgian, and especially Flemish, (tech) companies remain hesitant (or find it difficult) to position themselves in the defence sector and/or to market dual use products, i.e. goods, software and technologies designed for civilian applications but which can also be used for military purposes. The reasons, according to the report, include access to financing, lack of contacts with governmental entities involved, and the absence of and/or difficulties with obtaining necessary certifications, licences and security clearances.

In this blog, we identify the main legal challenges that new entrants face when seeking to operate in the defence market and suggest practical approaches to overcome them.

A commonly cited obstacle is the lack of familiarity with defence procurement. Many companies no longer have in-house experience with military tenders or contract performance in this field.

The issue is compounded by the diversity of applicable procurement regimes. Depending on the nature of the purchase and the identity of the buyer, defence-related procurements may be governed by:

• the classic public procurement directive (2014/24/EU), the utilities procurement directive (2014/25/EU) or even the concessions directive (2014/23/EU),
• the defence and security procurement directive (2009/81/EC),
• non-EU regimes, such as NATO procurement rules or specific intra-state arrangements,
• contracts entirely exempted from EU law under Article 346 TFUE, which allows Members States to depart from procurement rules when essential security interests so require. In practice, more than half of military purchases are in fact awarded under this Article 346 regime.

This opaque patchwork may create uncertainty and discourage participation. Yet, this obstacle is far from insurmountable. In practice, all these instruments are grounded in the same foundational principles: equal treatment, transparency, proportionality and open competition, unless good reasons substantiate forms of flexibility. Once these principles are understood, the legal logic of the procedures, even when the formal rules differ, becomes familiar.

That does not mean that legal counsel cannot be useful to provide support to help market actors to grasp the relevant framework and structure their bids. In fact, as the devil is often in the details in crafting a successful bid, such support may be indispensable. Nonetheless, familiarizing yourself with basic principles, legal logic and recurring issues and/or concerns already goes a long way.

One such recurring specific concern in defence procurement relates to selection criteria. Some tenders impose experience-based requirements that are too rigid, such as demanding prior references in the defence sector. This is particularly problematic given that public disengagement from defence in previous decades has led many capable companies to shift their focus to civil markets, sometimes abandoning or foregoing dual use (or even exclusive defence) focus.

Here, contracting authorities have an important role to play, i.e. in duly balancing access with reliability concerns, as they may be reflected in experience-related criteria. Such (selection) criteria should be proportionate and tailored to the actual needs of the contract. A company with strong technical and organisational capacity may well be perfectly able to perform a defence contract, even if it lacks prior experience in that particular sector. Companies should therefore actively monitor for possible disproportionate selection criteria or other requirements that unduly restrict competition. Procurement law offers tools to do so, for instance by participating in pre-tender market consultations (such as Requests for Information, or RFIs) or by formally inviting the contracting authority to revise the requirements before submission of offers.

More generally, proactively displaying such critical interest in contract that are subject to public procurement rules may put a company on the map with the relevant governments. This is particularly important in the defence sector, as many contracts are concluded without running through the formal procurement procedures. In such cases, it is crucial that the contracting authority is aware of what a company has on offer. As “direct marketing” towards governments may be tricky from a legal perspective, voicing concerns reflective of interest is a legally rather safe path to gain notoriety in a particular market segment.

A further hurdle for newcomers is the absence of the necessary security clearances. As highlighted by the Agoria study, only a very small proportion of Belgian companies interested in defence activities currently possess the required clearances to access confidential information or handle classified material.

In practice, many defence-related tenders involve classified information. Under Belgian law, classified information is any information or material to which a security classification has been assigned and which requires protection against disclosure or unauthorised access for reasons of national security. To access or handle such information, specific regimes (authorisations following a security investigation or verifications following security advice) are set up pursuant the recently modified 1998 Clearance Act.

These (or other) regimes may translate into concrete obligations for bidders. Contracting authorities may require proof that tenderers, their key personnel, and/or subcontractors hold national security clearances (or equivalent clearances recognised by Belgium). Many clearances need to be obtained via the National Security Authority (ANS/NVO), which may audit sites, processes and IT systems.

Obtaining such clearances may be a time-consuming and resource-intensive process. It can take several months before a company receives the required authorisations, during which opportunities may be missed. The lack of anticipation on this front is therefore a common barrier to market entry.

New entrants are well advised to initiate clearance procedures early and to incorporate compliance planning into their market strategy. Partnering with an already accredited company may also provide a temporary solution.

Nonetheless, legal options may remain for those companies who cannot possibly obtain the required clearances in due time to participate in a tender. After all, contracting authorities may be required to take into considerations the clearance lead times, especially when considering excluding new market entrants who have no good reasons (aside from tender participation) to apply for the relevant clearances.

Even when participation in defence projects is allowed, companies face another critical regulatory layer, which may be relevant for public and private contracting alike: export control regimes. These rules apply not only to the transfer of military goods in the strict sense but also to a wide range of dual-use products and technologies.

The export of purely military goods remains largely a matter of national competence. In Belgium, licences are granted by the regional authorities (Flanders, Wallonia and Brussels-Capital), each having its own licensing authority and procedures. This means that companies active across multiple sites must navigate a patchwork of administrative practices, deadlines and political sensitivities.

By contrast, the export of dual-use goods is regulated at EU level under Regulation (EU) 2021/821 (the Dual Use Regulation, DUR). This Regulation establishes:

• A common EU control list,[3] aligned with international regimes such as the Wassenaar Arrangement, covering items like sensors, encryption software, semiconductors or advanced materials;
• A system of authorisations (individual, global, and EU general export authorisations);
• A broad concept of “export” that includes not only physical shipments but also electronic transfers of software and technology.

Many companies underestimate the complexity and costs associated with export compliance. Risks include:

• Delays: obtaining licences can take weeks or months, which may disrupt delivery schedules under procurement contracts;
• Liability: incorrect classification, missing licences or failure to keep proper records may trigger administrative fines, reputational damage, or even criminal sanctions;
• Extraterritoriality: contracts involving US-origin components may also fall under the scope of US export control (ITAR/EAR), adding another compliance layer.

New entrants should therefore establish internal compliance programmes and anticipate licensing requirements early in the bidding or contracting process.

Conclusion: legal readiness as a prerequisite for entry

While the defence sector presents undeniable opportunities for diversification and technological advancement, entering it requires legal preparedness.

Legal departments play a critical role in assessing eligibility, structuring partnerships, mitigating compliance risks and negotiating favourable contract terms. With the right guidance, many of the legal barriers described above can be overcome or significantly reduced.

In a context where the EU is actively seeking to broaden its defence industrial base, legal readiness may well become a competitive advantage, especially in a market where traditional player’s espousal of “old paradigm” may indeed stifle efficiency.[4]

Authors
Maxime Vanderstraeten, Stef Feyen

[1] « Près de 200 sociétés belges veulent se lancer dans des activités de défense », L’Écho, 11 June 2025; « Honderden Belgische bedrijven hopen op deel defensiemiljarden », De Tijd, 11 June 2025.

[2] https://www.agoria.be/fr/themes/positionnement/federal/au-moins-195-entreprises-technologiques-belges-veulent-se-lancer-dans-les-activites-de-defense ; Minstens 195 Belgische technologiebedrijven willen defensie-activiteiten opstarten | Agoria

[3] On 8 September 2025, the European Commission adopted a Delegated Regulation updating the EU dual-use export control list in Annex I of Regulation (EU) 2021/821. The update introduces new controls on quantum technologies, semiconductor manufacturing equipment, advanced computing circuits, coatings for high-temperature applications, additive manufacturing machines and related materials, peptide synthesisers, and others.

[4] As is evident from a recent McKinsey report, there are certainly opportunities to compete with traditional actors in the defence sector, which often work on the basis of less than efficient “old paradigms” and may resist “rewiring their operations” (McKinsey, “Rewiring aerospace and defense operations for speed and growth”, 25 August 2025, available on Rewiring aerospace and defense operations | McKinsey.