Defence Contracts 2026

Defence Contracts 2026 Global Overview

Welcome to the 2026 edition of the Chambers Global Practice Guide to Defence Contracts. This guide arrives at a moment when defence procurement has moved from a specialist area of public contracting to a central instrument of national security, industrial policy and international co-operation. Governments are seeking to replenish stocks, strengthen deterrence, protect critical infrastructure and adopt new technologies at a pace rarely seen in recent decades. Suppliers, investors and advisers therefore face a market of exceptional opportunity, but also one in which political sensitivity, legal complexity and delivery risk are unusually high.

The chapters that follow explain how these pressures are expressed through different legal systems. Although the rules vary, the same questions recur: who may compete, how security and sovereignty shape procurement, what information may cross borders, how governments allocate risk, and how contractors can deliver at speed without compromising integrity or accountability. This introduction draws those threads together and identifies the issues that businesses should consider before entering a new defence market or expanding an established presence.

A market shaped by strategic urgency

The defining context for defence contracting in 2026 is sustained geopolitical instability. Russia’s continuing war against Ukraine, conflict and volatility in the Middle East, strategic competition in the Indo-Pacific, terrorism, cyber operations and threats to space and subsea infrastructure have altered assumptions about readiness. Governments are no longer procuring only for long-term modernisation. They are also buying for immediate availability, stockpile depth, resilience and the ability to sustain operations over time.

The scale of the change is significant. The Stockholm International Peace Research Institute (SIPRI) reported that global military expenditure reached USD2.718 trillion in 2024 after a decade of consecutive increases, with spending rising in every region. In 2025, NATO allies committed to invest 5% of GDP annually by 2035 in core defence requirements and wider defence- and security-related expenditure. The European Union has added new financial and industrial instruments, including the EUR150 billion SAFE (Security Action for Europe) loan mechanism for joint procurement. Comparable efforts to increase capability, domestic production and supply-chain security are visible across North America, the Indo-Pacific and the Middle East.

Larger budgets do not, however, guarantee rapid or effective delivery. Public finances remain constrained, inflation has increased programme costs, and competition for skilled labour, production capacity and critical inputs is intense. Buyers are under political pressure to demonstrate value, speed and national benefit at the same time. Contractors should expect closer scrutiny of price, performance, delivery schedules and economic contribution, even where urgency permits accelerated or non-competitive procedures.

Procurement at speed and the continuing importance of process

Many jurisdictions are reforming procurement rules, shortening competitions and using framework agreements, direct awards, government-to-government arrangements and urgent operational requirements. Agile acquisition models, spiral development and experimentation are increasingly used where technology changes too quickly for a conventional multi-year specification. These approaches can give new entrants and smaller businesses routes into programmes that were once dominated by established prime contractors.

Urgency does not remove public-law risk. Decisions may still be challenged for unequal treatment, lack of transparency, improper evaluation or misuse of a national-security exemption. The boundary between legitimate security protection and unjustified restriction of competition remains important. A supplier must understand not only the written tender rules, but also the authority of the purchasing body, applicable review mechanisms, standstill or protest procedures, and the practical consequences of challenging a strategically important award.

Early engagement is especially valuable. Pre-market consultations, capability demonstrations and industry days can influence how a requirement is framed, but communications must be controlled to avoid unequal access, conflicts of interest or allegations that a specification favours one supplier. Bid teams should maintain disciplined records of engagement and ensure that technical ambition is matched by evidence of manufacturability, certification and realistic delivery.

Sovereignty localisation and market access

Defence markets are increasingly open to international collaboration yet more demanding about domestic benefit. Governments seek assured access to production, maintenance, intellectual property, data and skilled personnel in a crisis. Requirements for local incorporation, domestic content, technology transfer, industrial participation, security-cleared facilities or local partners are therefore becoming central commercial terms rather than peripheral policy objectives.

The result is a more regionalised market. European initiatives encourage joint procurement and greater use of European industrial capacity; the United States and other major buyers continue to apply domestic preference and supply-chain rules; and many emerging markets use offset or localisation obligations to develop sovereign capability. Multinational programmes can create scale and interoperability, but they also combine different budget cycles, export policies, security classifications and rules on workshare.

Businesses should assess market access before committing bid expenditure. The relevant questions include foreign-ownership restrictions, investment screening, licensing, eligibility for classified work, local-content calculations, offset enforcement, tax and permanent-establishment exposure, and whether a proposed joint venture will receive the technology and decision-making authority needed to perform. Localisation promises should be costed and governed as enforceable obligations, with clear responsibility for suppliers, training, facilities and knowledge transfer.

Supply chains: capacity and resilience

Recent conflicts have exposed the limitations of lean production and globally dispersed defence supply chains. Long lead times for materials, microelectronics, specialist metals, propulsion systems and machine tools can determine whether or not a programme succeeds. A contractor may be legally able to supply an item but unable to secure enough components, qualified personnel or test capacity to meet the promised schedule.

Customers are responding with demands for supply-chain visibility, second sourcing, stockpiles, surge plans and notification of vulnerabilities. Contract terms increasingly address continuity of supply, priority allocation, obsolescence, cyber incidents and changes in control of critical subcontractors. Prime contractors remain accountable for extensive supplier networks and may be required to flow security, audit, export-control, human-rights and quality obligations through several tiers.

Due diligence should therefore extend beyond financial solvency. It should identify geographic concentration, single-source dependencies, sanctions exposure, beneficial ownership, counterfeit risk, access to raw materials and the ability to operate during disruption. Resilience measures must be reflected in price and programme governance; otherwise, an apparently competitive bid may transfer unmanageable cost to the contractor.

Export controls, sanctions and responsible transfers

Defence contracts are inseparable from export controls. Hardware, software, technical data, brokering, training and maintenance may each require authorisation, and an exchange between colleagues or access to a shared digital environment can amount to a controlled transfer. Multinational teams must map the origin and classification of technology, the countries and nationals who may access it, end-use and end-user restrictions, re-export conditions and reporting requirements.

Sanctions add a rapidly changing layer of risk. Restrictions may apply to customers, banks, freight routes, insurers, shareholders and indirect counterparties. A licence under one regime does not resolve obligations under another, and contractual performance may become unlawful after award. Effective clauses should address licence responsibility, co-operation, suspension, alternative sourcing, disclosure and termination, while recognising that a broadly drafted force majeure provision may not answer every sanctions problem.

Responsible-transfer considerations are also receiving greater attention. International humanitarian law, the Arms Trade Treaty where applicable, human-rights risk, diversion and end-use monitoring can influence licensing and reputation even when a sale is politically supported. Contractors need defensible due diligence, escalation routes and records showing how warning signs were assessed.

Technology: data and intellectual property

The modern defence market increasingly depends on software, artificial intelligence, autonomous systems, uncrewed platforms, space capabilities, quantum technologies and commercially developed dual-use products. This creates opportunities for businesses unfamiliar with traditional defence procurement. It also creates friction between fast commercial development and contracting models designed for bespoke platforms with long service lives.

Data rights and intellectual property should be addressed at the start of a programme. Customers require sufficient rights to operate, maintain, integrate and upgrade capability, while suppliers need to protect reusable technology and commercial markets. Poorly defined background and foreground rights can impede competition, through-life support and export. Contracts should distinguish ownership from access rights, define interfaces and deliverables, and deal expressly with source code, software dependencies, model training data, technical publications and rights arising from jointly funded development.

Artificial intelligence introduces additional questions about assurance, bias, explainability, human control, testing and liability. Regulatory approaches differ and will continue to evolve. For defence use, compliance with general technology rules may sit alongside military exemptions, ethical policies and operational legal review. Suppliers should build governance and evidence into the engineering life cycle rather than treating them as final-stage approvals.

Cybersecurity and classified information

Security is both a condition of market entry and a continuing performance obligation. Personnel clearances, facility accreditation, classified-contract procedures and restrictions on foreign ownership or influence can affect corporate structure and mobilisation time. Clearances are not automatically transferable between countries, and a contractor should not assume that an allied relationship permits unrestricted information sharing.

Cybersecurity requirements are becoming more prescriptive and are extending down the supply chain.

Customers increasingly expect demonstrable controls, incident reporting, vulnerability management and secure software development. The contract must align regulatory notification duties with national-security restrictions and specify how parties will investigate, remediate and communicate an incident. In acquisitions and joint ventures, cyber and security due diligence can be as important as conventional financial review.

Contract risk in an uncertain economy

Defence contracts frequently combine demanding specifications, sovereign rights and long periods of performance. Inflation, currency movements, tariffs, shortages and changing requirements can make a fixed-price commitment unsustainable. Contractors should test indexation, price-adjustment, change-control and relief provisions against realistic scenarios, including delays caused by government-furnished equipment, licences, security approvals or range access.

Liability regimes also deserve careful attention. Customers may seek extensive warranties, liquidated damages, indemnities, step-in rights, audit access and termination for convenience. Caps and exclusions may be restricted by public law or policy. The commercial position should be considered together with insurance availability, parent-company support, intellectual-property exposure and the consequences of suspension or debarment. Programme governance, accurate reporting and early escalation remain the most effective protection against disputes.

Integrity, sustainability and public confidence

The increase in defence spending brings greater expectations of integrity. Secrecy and urgency can heighten corruption risk, particularly where intermediaries, offsets or single-source awards are involved. Anti-bribery controls must be tailored to actual routes to market and supported by due diligence on agents, partners and beneficial owners. Books and records, approval controls and protected reporting channels matter as much as contractual representations.

Environmental and social considerations have not disappeared, although their application to defence varies. Energy security, climate resilience, hazardous materials, modern slavery, workforce welfare and the environmental impact of production and disposal can affect eligibility, financing and delivery. Contractors should distinguish mandatory requirements from policy aspirations and avoid unsupported claims, while preparing for more detailed supply-chain information requests.

Looking ahead

The opportunity in 2026 is clear: governments need capability, production capacity, innovation and trusted partners. Yet success will depend on more than a strong product. Businesses must understand the public-law framework, political objectives and security culture of each market; choose partners carefully; protect technology; and build export, cyber, integrity and supply-chain compliance into delivery.

The jurisdictional sections in this guide explain how those common pressures translate into local rules and practice. Read together, they show a defence market becoming larger and faster, but also more strategic, regulated and interconnected. The author hopes the guide helps readers identify both the opportunities and the points at which early legal and commercial planning can prevent delay, dispute or loss of market access.