In response to increasing demand for military equipment, European defence companies are rapidly expanding production capabilities, turning to legal experts to navigate complex regulatory and operational challenges. A recent example is the conversion of a historic rail factory in Görlitz, eastern Germany, into a Franco-German tank maker KNDS production hub. Sold by France’s Alstom last year, the factory now produces components for Germany’s Leopard II main battle tank and the Boxer armoured vehicle.
The transition from civilian rail manufacturing to defence production required careful legal and operational planning. Björn Paulsen, a partner at law firm Noerr who advised Alstom, highlighted three main challenges: complying with regulations, managing a phased handover that allowed Alstom to complete existing orders while KNDS ramped up, and addressing complex employment issues to redeploy engineers to new roles. A critical step involved obtaining prior approval from the employee works council before altering the factory’s operational focus.
This transformation is part of a broader push across Europe to enhance arms production amid record order volumes and increased geopolitical tensions. After years of underinvestment, the defence industry faces immense pressure to deliver equipment ranging from tanks and missiles to drones swiftly and at scale. The evolving battlefield and fast-changing technology landscape have led companies to seek advice on cross-border and cross-industry partnerships, while governments aim to secure sovereign manufacturing capabilities and revise procurement strategies.
Legal professionals have played a key role in structuring innovative contracts to support these efforts. Adrian Walker, a partner at Hogan Lovells Cadwalader, cited a recent £9 billion contract between Rolls-Royce and the UK Ministry of Defence (MoD) for nuclear submarine reactors. The eight-year agreement consolidated multiple contracts, providing funding certainty and flexibility, which the MoD said would generate savings of £400 million. This approach contrasts with the UK MoD’s usual annual funding cycle, which experts say poses challenges for long-term projects requiring upfront investment.
However, the accelerated rearmament drive presents difficulties. Trevor Taylor, director of the defence, industries and society programme at the Royal United Services Institute (RUSI), described the pressure on companies to meet government demands as "a problem," emphasizing the need for investment in infrastructure, logistics, training, and personnel.
Cross-border industrial collaborations are also emerging, requiring intricate legal structuring to comply with export controls and foreign investment rules. For instance, Guillermo Guerra, partner at Gómez-Acebo & Pombo, advised Spanish defence firm Indra on creating a dual joint venture with the United Arab Emirates’ Edge company. One venture, based in Abu Dhabi, focuses on advanced radar systems, while the other, pending regulatory approval in Spain, develops loitering munition systems for European programmes. Guerra stressed the importance of retaining control over technology and its use while facilitating international partnerships.
In parallel, major defence contractors are increasing investments in military start-ups to keep pace with technological innovation. Data from Dealroom shows that leading Western defence companies, including Lockheed Martin and BAE Systems, participated in a record $4.1 billion in venture capital deals through July 2026. BAE committed €50 million to funds backing European defence start-ups, while Lockheed pledged at least $100 million in UK and European technology ventures. These funds aim to provide capital for acquisitions, helping companies adapt to fast-evolving defence needs.
As Europe seeks to enhance its military readiness, legal advisors remain integral in managing the regulatory, financial, and operational complexities of a rapidly transforming defence industry.