Export Control for Dual-Use Tech Part 1 🚛 🚚

Welcome 🇪🇺

Welcome to the 4th issue of the European Resilience Newsletter and thank you to those who already subscribed! Uwe and I (more about us at the end) started this newsletter to accelerate the building of the European DefenceTech ecosystem and fill a critical gap in European Resilience. We will keep the content bite-sized, frequent and free. We also openly invite guest content creators to contribute (see below for details on how to join). Our goal is to build an ecosystem of founders, operators, investors, and industry experts who are dedicated to enhancing European resilience through technology.

This issue we welcome our 1st guest author David Rösch PhD, Associate from the leading European law firm Noerr to share some insights on the regulation around exporting dual-use technology across Europe.

Export Control for Dual-Use Tech - Part 1 🚛 🚚

Running a start-up in the resilience space? Then you are more likely than not subject to export and investment controls—an intricate set of rules aiming to protect public order and security as well as national foreign policy and security interests. These controls affect anything from where you can bring your product to who can invest in your company—from pre-seed to IPO. As German satellite start-up KLEO Connect reportedly experienced, these controls can derail entire transactions. Short of that, breaches may result in substantial fines.

This first piece in a series will look at the nuts and bolts of export controls and their impact on your company.

Unsurprisingly, export controls govern what you can and cannot export without a license, but also e.g. the provision of certain services abroad and the movement of certain goods within the EU. Export controls target dual-use items and military goods. And an “export” does not require physically moving goods across borders: granting access to data on a server can suffice.

A. Restrictions on Dual-Use Items

At the EU level, the Dual-Use regulation governs dual-use items, that is goods to include software and technology that can be used for both civil and military purposes.

Export controls generally follow a list-based approach, that is they only apply to specific goods listed in EU and German laws. The EU Dual-Use List comprises a wide-ranging number of goods subject to export controls. Listed categories include, inter alia, electronics, computers, telecommunications and information security, navigation and avionics, and aerospace and propulsion.

If your goods are listed, you need a license to export them outside the EU customs territory. General authorizations for exports of certain items to certain countries are available. If these do not cover your export, you will have to apply for an individual authorization with the competent authority—in Germany, that is the Federal Office for Economic Affairs and Export Control (BAFA). Getting an individual license may take anywhere from several months to over a year in difficult cases.

Unsure whether your item is listed after consulting the Dual-Use List? One way to find out is by applying for an assessment by BAFA confirming your item is not on the Dual-Use List or Germany’s national Export List. Given this limited scope, the safest option often is to apply for a ruling by BAFA that a specific export is not subject to any restrictions (to include e.g. due to sanctions).

You only have EU customers and no one accesses your data from abroad? You may still require a license if you are dealing in particularly sensitive dual-use items. For these, a license is required for any movement outside Germany.

Non-listed goods may also be subject to export controls if they are potentially intended for critical end uses, for example missiles, military end uses, or grave human rights violations.

B. German Export Controls on Military Equipment

German export control law comes into play for military equipment, that is war weapons and “other military equipment”.

Germany’s Export List sets out goods considered military equipment, that is goods specially designed or modified for military use. These include weapons and ammunitions, but also technical equipment, protective equipment, and certain vehicles. Also caught is certain software and technology, i.e. the specific technical knowledge required for the development, production or use of a product.

Military equipment requires a license both for export outside and for any transfer within the EU — in other words, any time it leaves Germany.

War weapons are a subset of military equipment. They are subject to additional, particularly stringent prohibitions and controls. For example, licenses are required for their production, for obtaining and submitting control over them, and for any transport, including within Germany.

C. EU Sanctions

The EU’s sanctions regimes against specific countries add another layer of complexity. Sanctions may ban the export of specific goods to specific countries, but also the provision of services or making funds or economic resources available to listed persons. Crucially, EU sanctions routinely include bans on the indirect supply of listed goods, funds, and economic resources to sanctioned persons and entities. Companies are thus required to thoroughly screen their customers and ensure a robust Internal Compliance Program (“ICP”) is in place.

Export controls in their many forms are therefore bound to affect most companies active in resilience tech in one way or another. Navigating the byzantine multi-level regulatory framework can be daunting. However, given the potentially grave consequences of violations, familiarizing yourself with the rules and putting in place a robust internal compliance program early on will pay dividends down the road.

Noerr is one of the top European law firms with 500 professionals in Germany, Europe and the USA. We deliver real value to our clients by devising and handling the right solutions to complex and sophisticated legal matters. The Noerr difference is our unique combination of legal excellence, creative thinking, international experience and in-depth industry knowledge. Together with our tax advisors, auditors and management consultants, we also develop sustainable solutions for finance and management.

Governments Should be Better Customers to Start-ups 🇪🇺

Uwe shares some of his thoughts on how governments can improve their working relationship with start-ups in his latest oped in Sifted - read below:

News That Caught Our Attention 👀

  • Anduril closes a £17m contract with United Kingdom Ministry of Defence in a combination for their tower and Lattice platform for the MoD’s Talon Project - UK MoD link

  • More on Anduril and their effect on venture capital investing in DefenceTech - Information link

  • The very detailed article on the current counter-UAV arsenal used in Ukraine provided largely provided by its allies - DefenceOne

    Source: MARSS Interception Drone

  • Strong LP fund investor appetites for DefenceTech VCs in the US - Pitchbook link

Featured Jobs 👷

Every week we feature a list interesting roles in European DefenceTech start-ups and scale-ups for readers seeking their next challenge in their careers.

If you are a founder and would like to promote your open roles, please get in touch with us!

Passionate and want to contribute? 👩🏻‍💻

The European Resilience Tech Newsletter is always looking for regular and guest authors, writers, reporters, content creators etc. If you like what you read, you are passionate about improving European resilience regardless of your background and want to contribute, just reach out to us!

European Resilience Tech Newsletter Team

Uwe Horstmann co-founded Project A Ventures in 2012 as General Partner and has built Project A to be a leading European early stage investor with over $1bn USD under management and having backed 100+ founders. In addition to Project A, Uwe serves as Reserve Officer in the German armed forces and advises the German Ministry of Defence in digital transformation issues.

Jack Wang is a software engineer turned product driven tech investor and joined Project A in 2021 to lead the firm’s deep tech investing, which have grown to include DefenceTech. Prior to joining Project A, Jack worked in a variety of organisations such as Amazon and Macquarie Group across Australia, US and UK / Europe. Jack holds a MBA from London Business School and Bachelors of Engineering (Bioinformatics, 1st) from UNSW, Australia.

Project A Ventures is one of the leading early-stage tech investors in Europe with offices in Berlin and London. In addition to 1 billion USD assets under management, Project A supports its 100+ portfolio companies with a platform team over 140 functional experts in key areas such as software and product development, business intelligence, brand, design, marketing, sales and recruiting. Project A have backed founders of Trade Republic, WorldRemit, Sennder, KRY, Spryker, Catawiki, Unmind and Voi as well as founders building in European Resilience: