Recital (6)

Horizon Europe, which was established by Regulation (EU) 2021/695 of the European Parliament and of the Council, is the Union’s funding programme for research and innovation, playing a pivotal role in the global scientific and technological leadership of the Union. The European Innovation Council (EIC) Accelerator established by that Regulation provides support, in particular, for innovations with breakthrough potential, and of a disruptive nature with scale-up potential, which may be too risky for private investors. Small or medium-sized enterprises (SMEs), start-ups and some small mid-cap enterprises operating within the defence sector require financing for the commercialisation of innovative products. However, such legal entities face higher barriers for access to finance, compared to legal entities in other sectors. As highlighted in the Joint White Paper, it is necessary to increase European defence readiness, because Europe is currently being affected by war, aggression and other hostile acts. For that purpose, a substantial increase in support to high-impact, defence-related innovation, including much-needed support to SMEs, start-ups and some small mid-caps willing to scale up such high-impact defence-related innovations, is needed. However, the current architecture of Union programmes, including the European Defence Fund (EDF), does not provide the scale, flexibility or speed required to mobilise such support in an effective and timely manner. The current architecture might create uncertainties for the legal entities in the defence sector with regard to the access to support for technologies with potential dual-use applications. Given the severity of the threat in the current environment, extraordinary measures are justified and necessary. While support for defence research and development is carried out through the EDF, which is a specific programme of Horizon Europe, it is appropriate, on the basis of the current strategic context, to open the EIC Accelerator to actions with potential dual-use applications, while advancing civilian application use. Support to scale-ups under the EIC Accelerator STEP Scale-up Scheme (the Scheme) should also be extended to non-bankable SMEs, including start-ups and non-bankable small mid-caps, such as entities which have already received support from the Accelerator carrying out breakthrough and disruptive non-bankable innovation in critical defence technologies while fostering, where appropriate, innovations with dual-use potential. Scale-up support in the form of direct equity investment, whereby funding is provided directly to companies, is not available under existing defence-focused funding instruments, in particular the EDF and the Defence Equity Facility deployed under InvestEU. The opening of the Scheme to innovation in critical defence technologies is therefore necessary to support legal entities investing in the defence sector, while ensuring complementarity with other existing Union instruments. This justifies establishing a targeted exception within the current Multiannual Financial Framework (MFF) to the principle set out in Article 7(1) of Regulation (EU) 2021/695, which provides that research and innovation activities under Horizon Europe have an exclusive focus on civil applications, while avoiding unnecessary duplication. The targeted exception is without prejudice to the outcome of the upcoming negotiations in the context of the next MFF. The Commission should ensure proper oversight of the application of the targeted exception, including through the collection and reporting of appropriate data in the context of the existing monitoring and evaluation of the EIC, without creating additional administrative burdens for participants.