AUSTRIA Trends and Developments Contributed by: Martin Schiefer and Christian Richter-Schöller, Schiefer Rechtsanwälte GmbH
Austria 2026: A Neutral Country Rearms Austria enters 2026 in the middle of its largest mili - tary build-up since the founding decades of the Second Republic. The constitutional commitment to permanent neutrality remains untouched, but the understanding of what neutrality requires has shifted visibly: from a reason for minimal defence spending to an argument for credible self-defence. The war in Ukraine, repeated airspace and drone incidents across Europe, and the debate about European stra - tegic autonomy have produced a political consensus that the Austrian Armed Forces must be rebuilt across all domains. The financial basis is in place. The Defence Funding Act ( Landesverteidigungs - Finanzierungsgesetz ) pro - vides a legally secured multi-year budget path, an unu - sual instrument in Austrian budgetary law, and current government planning targets defence expenditure of around 2% of GDP by 2032, roughly a doubling within a decade. For suppliers and their advisers this means, above all, volume: procurement of ground-based air defence, aircraft, helicopters, armoured vehicles, ammunition, drones and counter-drone technology, cyber capabilities, infrastructure and digitalisation is running in parallel, alongside a substantial recruitment and modernisation agenda. Three developments deserve particular attention from anyone doing defence business in or with Austria: the shift from classic tendering to co-operative procure - ment, the arrival of the EU as a defence-industrial actor, and a markedly tighter compliance environment. From Classic Tenders to Co-Operative Procurement The most consequential trend in Austrian defence procurement is structural. Major platform decisions are increasingly implemented through government- to-government arrangements and joint procurement with partner states rather than through EU-wide competitive tenders under the defence procurement regime. Recent examples include the procurement of M-346FA light fighter and trainer aircraft through a government-to-government arrangement with Italy, the C-390 transport aircraft programme conducted in co-operation with the Netherlands, AW169 helicop - ters procured through a government-to-government
programme with Italy, and ground-based air defence acquired within the framework of the European Sky Shield Initiative, which Austria joined in 2023 together with Switzerland. The legal basis for this shift lies in the exemptions of Directive 2009/81/EC as implemented in the Aus - trian Federal Procurement Act Defence and Security (BVergGVS 2012): contracts awarded by one govern - ment to another and contracts governed by inter - national rules fall outside the tendering regime, and Article 346 TFEU provides a further derogation where essential security interests genuinely so require. What was designed as an exception has, for major plat - forms, become the standard route, in Austria as in much of Europe. For industry, three practical consequences follow. • Market access shifts from bidding to partnering – where the platform decision is taken at government level, suppliers position themselves as subcontrac - tors, industrial partners and providers of mainte - nance, training and support around that decision, and they do so early. • Legal protection shifts to the threshold question – review proceedings increasingly concern whether an exemption was validly invoked at all, and the CJEU requires strict interpretation of every deroga - tion. Unsuccessful competitors have begun to test direct awards more systematically, and contract - ing authorities are well advised to document the exemption reasoning contemporaneously. • Contract practice changes – government-to-gov - ernment umbrella agreements are combined with implementing contracts, security-of-supply annex - es and long-term support arrangements, which demand a different drafting and negotiation skill set than classic tender documentation. Speed as the New Procurement Currency Alongside the structural shift to co-operative procure - ment, day-to-day procurement practice is changing under the pressure of timelines. Capability gaps that were tolerated for decades are now expected to be closed within a legislative period, and the procurement instruments are being used accordingly. Framework agreements are increasingly the vehicle of choice for
28 D EFENCE CON TRACTS 2 026
CHAMBERS.COM
Powered by FlippingBook