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As an important part of its so-called defence initiative, which aims at including the defence industrial sector in the EU internal market, the European Commission has expressed its intention to "phase out" offset requests in defence tenders within the European Union. To date, national public procurement authorities regularly oblige bidders in defence tenders to propose such compensatory economic activity in order to be eligible as contractor and ultimately win the tender. This article summarises the legal regime applicable to offsets and the actions taken so far in order to do away with this practice. The article argues that offset requirements constitute an impediment to cross-border trade and are in principle illegal under primary EU law. Only in special circumstances and well-founded cases may they be justified under the special security exception established by art.346 TFEU.
