Defence, sovereignty and capital: how France manages strategic control in a changing security landscape
- Karina G. Shevchenko
- Jun 25
- 4 min read
During the previous DSR Investment Forum on 26 May, organised by Nord Sloane Ventures, Roland Montfort of international law firm BCLP delivered highly valued insights. Drawing on his recent article, he examined how Europe’s security environment has shifted in recent years and how this transformation is reshaping the relationship between defence, capital and sovereignty.
The war in Ukraine, together with recent shifts in American foreign policy, has forced European states to revisit long-standing assumptions about security, industrial capacity and strategic autonomy. In this context, rearmament is not only a military imperative but also a financial one. The ability to mobilise private capital has become central to strengthening Europe’s defence base, while governments continue to insist on preserving control over the most sensitive assets and capabilities.
France provides a particularly useful case study of this balance between openness to investment and sovereign oversight. The French State remains deeply involved in the defence sector, not only as a customer but also as a regulator, shareholder and protector of national interests. Its approach is rooted in the doctrine of strategic autonomy, which has shaped French defence policy for decades and continues to influence how the sector is organised today.
At the centre of this framework is the Directorate General of Armaments, which acts as the main contracting authority for the French defence system. It works with major industrial groups that form the backbone of the national defence and technological industrial base. Through procurement policy, industrial supervision and long-term planning, the State seeks to preserve essential capabilities while ensuring that sensitive technologies remain under national control.
The legal and regulatory tools available to the State are extensive. Defence procurement contracts may include restrictive clauses such as change-of-control provisions and reporting obligations. Secrecy rules protect classified information and industrial assets. Manufacturing and trade in war materials are subject to prior authorisation. Each of these mechanisms is designed to ensure that strategic activities remain secure, even when companies evolve through investment, restructuring or ownership change.
Foreign investment control is another major layer of protection. Where a transaction concerns a strategic business, prior approval may be required from the State. Authorities can authorise a transaction, impose conditions or block it if essential national interests are threatened. For investors, this means that due diligence in the defence sector must go well beyond commercial analysis and include a careful assessment of the legal, political and security environment.
The State can also use more direct governance tools. Government commissioners may be appointed to certain companies to oversee strategic coherence and access sensitive information. In addition, specific shareholdings and preference shares can give the State special rights over governance decisions, threshold crossings, asset transfers and other actions affecting strategic assets. These instruments allow public authorities to retain influence without necessarily holding majority ownership.
Export controls are equally significant. France applies a highly regulated regime to the export and transfer of war materials, dual-use goods, software and technology. Licensing requirements, sanctions compliance and end-use restrictions form part of a broader system intended to prevent diversion and protect foreign policy interests. Because defence exports are closely tied to diplomacy and national strategy, companies must remain vigilant when entering new markets or pursuing cross-border transactions.
The article also highlights the growing role of private capital in defence. Institutional investors, specialist funds and strategic partners are increasingly active in the sector, reflecting both the scale of the opportunity and the urgency of the need. However, this does not remove the structural constraints that define defence investment. Instead, investors must operate within a framework shaped by sovereignty, regulation and operational security.
This tension between opportunity and constraint is one of the central themes of the piece. Defence companies need capital to scale production, develop technology and meet rising demand. At the same time, states will continue to apply oversight where national security is concerned. The result is a market where investment is not only possible but necessary, yet where diligence must cover legal, operational and geopolitical risk as carefully as financial performance.
Recent transactions and policy developments show how these dynamics are playing out in practice. The French State has demonstrated a willingness to support industrial consolidation and cross-border cooperation, but only where safeguards are in place to protect sensitive capabilities and supply chains. This reflects a broader European trend: attracting more capital into defence while maintaining strong public control over the most strategic parts of the sector.
For investors, the message is clear. Defence is not a conventional sector. It requires a detailed understanding of licensing, secrecy, procurement, export restrictions, foreign investment rules and governance rights. For policymakers, the challenge is equally clear: to strengthen industrial capacity without weakening the sovereign protections that make the sector resilient in the first place.
This analysis is directly relevant to Nord Sloane Ventures’ work at the intersection of defence, capital and strategic engagement. It reflects the same questions that shape our forums and advisory activity: how to connect investors with high-potential defence and dual-use opportunities, how to navigate sovereignty constraints, and how to build the informed capital ecosystem needed for long-term industrial resilience.
It also connects to the themes we will continue to explore at the upcoming DSR Investment Summit: Riviera 2026, taking place on 15–17 September for defence, security and resilience investors. More information is available at www.nordsloane.com/insights.
Join the upcoming DSR Investment Forum on the 7th of July in London.
Read the original document
Original document authored by Roland Montfort
Partner
Clément Tavenard
Senior Associate
BCLP
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