Innovation and defense have always been closely linked. New technologies have emerged from the needs of armies, and the military has been the origin of many innovations. The concrete used by the Roman Legions still fascinates with its durability and longevity. Mastering these innovations and maintaining a technological edge over adversaries has long been a regulatory issue. In 419 AD, Emperor Theodosius II decreed the death penalty for those who would transmit shipbuilding techniques to the Barbarians.
Ancestor of current regulations on export control, this decree shows that it is not only raw materials, components, or finished products that are controlled, but also technologies. This control has expanded and internationalized, in connection with treaties on arms limitation and non-proliferation of nuclear weapons. With the wars in Ukraine and the Middle East, tensions between the United States and China, and geopolitical instability, states have increased their controls on innovative technologies, especially on rare earths, semiconductors, supercomputers, quantum, artificial intelligence, and spatial technologies.
For tech companies, especially those working with defense, regulatory environment cannot be neglected, as it could jeopardize their development and even their existence. It is vital for them to analyze their production, partnerships, supply chain, and markets in light of these regulations to ensure their investments do not lead to a dead end or get seized by others.
The first step is to analyze their production, whether products, services, or software, to determine if they are subject to specific regulations, such as those on dual-use goods (BDU) or weapons materials. Many innovative technologies are classified as BDU and this category is expanding. Following their specifications and characteristics, these goods may be classified as weapons materials and be subjected not only to export control but also to a license for manufacturing and trade. This applies to certain space technologies, which French regulations consider to possess military capabilities.
This initial effort is essential, both for the company itself and its suppliers, subcontractors, and partners, to secure upstream elements including the supply chain, industrial partnerships, or financial partnerships. A supplier or subcontractor whose products or services are subject to export control can be a roadblock if these elements require prior authorization from a foreign state. Additionally, financing and partnerships can also pose obstacles due to the rights granted to the partner or financier.
Mapping out both upstream and downstream aspects allows the company – and its investors – to ensure they can freely capitalize on their innovations and investments while tapping into a growing defense market.
