Lithuania is rapidly upgrading its defence capabilities and is determined to ensure that strategic military procurements generate long-term value for the nation’s industry, technological progress and supply-chain resilience. To meet this ambition, Lithuania introduced a new industrial cooperation (offset) framework in 2024, establishing the legal basis for a system where part of the substantial funds spent on defence acquisitions – often through contracts with foreign suppliers – can be reinvested back into the Lithuanian economy and defence ecosystem.

In essence, in selected cases Lithuania will seek to negotiate that suppliers of high-value military equipment also contribute to the local defence industry by making targeted investments that strengthen national capabilities and support long-term growth.

Institutional Model: Clear Responsibilities and Coordinated Action

Lithuania’s defence and security industry offset policy is implemented through a coordinated network of national institutions working toward a common goal. At the forefront are the Ministry of National Defence and the Ministry of the Economy and Innovation – key leaders responsible for ensuring that technologies aligned with Lithuania’s military needs are developed locally, while actively engaging industry and the academic community in this effort.

Together, these institutions create a unified framework that supports innovation, strengthens national capabilities and maximizes the long-term value of defence cooperation.

Conditions for Industrial Cooperation: A Manageable Framework with Some Challenges

Although the industrial cooperation (offset) requirements may appear complex at first glance, they are entirely manageable. In fact, they form a strong foundation for successful long-term partnerships between the state and industry. When approached strategically, these requirements become an opportunity rather than an obstacle, enabling suppliers to create lasting value within Lithuania’s defence ecosystem.

The key prerequisites for applying the industrial cooperation include:

• Contract value threshold: the state’s military equipment procurement contract must exceed EUR 5 million excluding VAT.
• Relevance to priority capabilities: the procurement must concern military equipment or other technologies essential for developing Lithuania’s priority defence capabilities.
• Local execution of life-cycle obligations: certain life-cycle obligations for the procured equipment or related services must be performed in Lithuania and/or by Lithuanian-based natural persons, legal entities, organisations or their units active in the development of armaments, military equipment, and related technologies. The contracting authority must assess and justify the need to apply the offset model.
• No negative impact on EU competition: industrial cooperation may be applied only if it does not adversely affect competition within the EU internal market for products not intended exclusively for military use. The Ministry of National Defence conducts this assessment using an approved questionnaire:
  ○ if no negative impact is identified, further competition assessment may be waived.
  ○ if potential negative effects are detected, mitigation measures must be introduced.
  ○ the Competition Council may also provide input during this stage.
• Market study requirement: market analysis must confirm that the required military equipment is not manufactured in Lithuania.
  Not a repeat procurement: offset model cannot be applied if the procurement is a repeat tender issued due to previously receiving no bids, no admissible bids or bids with inadmissible pricing.

All Partners Must Comply With National Security Requirements

A key principle of Lithuania’s industrial cooperation framework is strict alignment with national security interests. Importantly, the supplier must sign the industrial cooperation agreement before the main procurement contract is concluded. When a locally registered representative participates, the agreement must also be signed by the foreign manufacturer. In this way, both parties bear joint liability for fulfilling all obligations.

Every participant in the industrial cooperation chain – the supplier, subcontractors, manufacturers, all involved economic entities and the individuals who control them – must meet Lithuania’s national security requirements. The contracting authority initiates screening procedure and the final decision is made by the Commission for the Coordination of the Protection of Objects Critical for National Security.

Scope and Instruments of Industrial Cooperation

Industrial cooperation obligations may account for up to 30% of the total value of the military equipment contract. This ceiling ensures that cooperation remains proportionate while still creating meaningful opportunities for investment, innovation and capability development within defence ecosystem.

The supplier must select and agree with the relevant authorities on one or several industrial cooperation instruments, such as:

• Investing in Lithuania’s defence and security industry, strengthening national industrial capacity and long-term resilience.
• Transferring technologies to Lithuanian research institutions, universities, and/or enterprises, or engaging in joint scientific research, experimental development or innovation projects with these partners.
• Procuring goods or services from Lithuanian research and higher education institutions and/or enterprises, thereby stimulating local economic growth.
• Providing expert consultations to Lithuanian academic institutions and companies on matters related to military equipment production, technological development, or innovation in defence-related fields.
• Opening access to their production, research or testing infrastructure, enabling Lithuanian institutions and companies to use the facilities of the supplier or manufacturer and benefit from advanced capabilities.

Each selected instrument is assigned a specific score that reflects its strategic significance for Lithuania’s defence ecosystem. The highest-value contributions are those that generate new, tangible added value within Lithuania – particularly technology transfer initiatives and collaborative research and development projects, which are considered the most impactful and therefore receive the highest ratings.

Implementation of the Industrial Cooperation Agreement: A Partnership Built on Synergy

Before launching implementation, the supplier must submit a coordinated plan outlining selected industrial cooperation instruments. This plan must include:

• A clear explanation and justification for the chosen instruments.
• An assessment of how each instrument will support the development of Lithuania’s priority defence capabilities.
• A detailed financial overview and project schedule, including key milestones.

Although the legislation does not prescribe a specific document format, the preparation of a comprehensive, well-structured investment, technology transfer or research plan is essential. High-quality planning not only facilitates smooth coordination with authorities but also significantly increases the likelihood of successful implementation.

First Results

Well-designed offset commitments can ensure that Lithuania’s investments in high-value military equipment generate far more than immediate defence capability. They can return substantial value to the national defence ecosystem, strengthen industrial competencies and create long-term economic and technological benefits far beyond the procurement itself.

In 2024, Lithuania concluded its first successful industrial cooperation agreement valued at approximately EUR 17 million. Looking ahead, 11 procurements incorporating industrial cooperation mechanisms were planned for 2025, signalling strong momentum and growing interest in this model. At present, no public information on their outcomes has been released.

Assistance Provided by TRINITI JUREX

The TRINITI JUREX team supports suppliers at every stage of their integration into Lithuania’s defence sector ecosystem – from the initial preparation to participate in defence related public procurements to obtaining the required documents and permits, structuring partnerships, navigating all related legal and procedural steps.

Our extensive hands-on experience in public procurement and the defence industry, combined with a deep understanding of sector standards and customary technical requirements, enables us to effectively represent both Lithuanian and international suppliers. We ensure that clients are not only compliant but also strategically positioned for success within Lithuania’s evolving defence landscape.