Europe’s ‘answer to Delaware’ could help the continent rearm

The European Commission president, Ursula von der Leyen, recently stated that entrepreneurs are among the first victims of the fragmented regulatory landscape across EU member states. This remark could apply not only to defense technology founders but also to the EU Inc. campaign, which aims to create a new EU-wide company entity to ease business across the bloc.

Often referred to as Europe's answer to the Delaware C Corp, EU Inc. could help address one of the defense sector's biggest sources of friction. Venture investors view the new framework favorably, as a single EU entity would be more convenient than navigating 27 legal systems and over 60 national company forms. EU Inc. could benefit defense tech companies, including drone developers, by providing protection for intellectual property and reducing legal expenses.

The defense industry heavily protects its intellectual property, often filing patents in countries where it operates or internationally. However, publishing patents can be risky, as minor tweaks to drone technology can render an invention unprotectable. Defense companies may not wish to file or publish patents, instead relying on the knowledge of engineers they contract.

Rapid innovation cycles in modern warfare further support the idea of not filing or publishing patents. Europe's defense sector faces a dilemma: natural protectionism versus the need for unified systems for collective European defense. With plans to spend hundreds of billions on rearmament, the EU Inc. could help distribute capital across member states.

Once the legal form exists, a defense company's location should matter less, allowing it to serve as a security provider for all EU member states. The EU should have prioritized rearmament earlier, but government-to-government defense contracts and local registration requirements can delay access to potentially better technology.

Ukraine's defense tech industry is robust, with over 800 manufacturers and a $6.8 billion domestic market. European countries express interest in Ukrainian technology, but distrust of Ukrainian jurisdiction and concerns about corruption hinder access. Ukrainian companies could establish holding structures under EU Inc., overcoming some of these obstacles and deepening trust between countries, jurisdictions, companies, and governments.