Defence Finance Monitor - Analysis

Defence Finance Monitor - Analysis

Manufacturer Obligations in Europe’s Defence Factory Upgrades

Substantial Modification, In-House Machinery and Production-Line Integration under EU Law

Sep 24, 2026
∙ Paid

On 20 January 2027 Regulation (EU) 2023/1230 replaces Directive 2006/42/EC as the general law of the European Union on machinery. The change falls in a period in which European defence manufacturers are installing new production equipment inside factories that are already working. At its Ferrol shipyard, Navantia has described a €110 million Digital Block Factory as a fully digitalised, automated and robotised plant, and in July 2026 it reported that the factory was still being commissioned. New welding cells, automated handling systems, machine-tool upgrades, production software and integrated lines can be installed alongside equipment that has been in use for years. Each supplied machine may carry its own CE marking and declaration of conformity, but that does not settle the question on which the usability of the new capacity depends: whether the intervention creates a new machine or machinery assembly, substantially modifies an existing one, or amounts to manufacture for the undertaking’s own use, and therefore which legal person must assume the manufacturer’s obligations, for which object, before the equipment is used for production. For lenders, insurers, programme managers and procurement authorities the answer affects when installed equipment can be treated as usable capacity. What remains open is whether the evidence published about a defence-factory upgrade allows that responsibility to be located at all.

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