Defence and law
The world of commercial law is associated with major transactions, mergers and high-stakes corporate disputes. Lesser known is its vital role in something quite distinct: defence.
Defence procurement and financing is changing. An increasing turn to private capital and innovation and new ways of thinking about how cash-strapped governments in the West can fund defence spending has made the sector a growing recipient of the services which City law firms provide. The role of law acts as an invisible frontline in the attempts to re-arm Europe and increase its ability to protect itself from growing threats from Russia and beyond. Firms are leveraging financial expertise with public law acumen to assist defence-related institutions, governments and companies alike.
The proposed Defence, Security and Resilience Bank (DSRB) is an example in this case. It aims to raise capital from global markets, backed by the credit strength of member states to provide affordable financing for governments and defence firms. It involves only a modest equity contribution from members, without the joint liability due to shared debt obligations that other financial instruments such as Eurobonds require. The DSRB comes as a result of governments needing a way to increase defence spending without cutting from other budgets or sharply increasing their short-term debt. It also aims to support small-to-medium-size defence businesses requiring greater access to capital within the notoriously complex and fragmented supply chains in the defence industry. A robust legal framework for the DSRB is essential to make its proposed advantages concrete. At the Information Day for the bank in September, representatives from a major international law firm made clear the role of law in ensuring the success of the proposed bank. Sovereign immunity, and legal provisions for paid-in capital and callable shares form the backbone of ensuring the proposed financial institution is fit for purpose. The politics of Whitehall may yet impact the fate of the DSRB, but without a legal architecture that guarantees its operability, the bank would be just another idea.
Commercial law in action
These developments come as Western governments seek to foster innovation in the defence sector to gain competitive advantage over their adversaries, whose use of sheer mass of force aims to gradually degrade resistance. The battlefields of Eastern Ukraine, where soldiers zigzag through trenches to evade drones operated from deep behind enemy lines, offer a grim visual spectacle of where 20th century tactics meet 21st century technology. In a conflict where technological superiority is key to Ukraine’s efforts, Mishcon De Reya’s support of AI defence start-up Arondite in their £9 million fundraising round in May 2025 shows the role law firms have in fostering defence innovation. Arondite’s aim to address the challenge of integrating systems built by different manufacturers and deployed by militaries is a significant contribution, particularly to NATO member states where interoperability is a priority. Robust due diligence, financial structuring and obtaining regulatory clearance on a highly scrutinised product combining AI technology and defence capability is essential to ensure these initiatives do not fall apart before they become useful to soldiers on the front line. In this case, Mishcon De Reya’s reputation in venture capital fundraising made it the partner of choice, a continuation of how in a highly specialised legal services industry the individual strengths of law firms will reflect in the types of clients and projects they are involved with.
Law, geopolitics and mitigating risk
Commercial law firms also have a role in structuring the agreements that will impact Europe’s security arrangements and relationships for years to come. Transatlantic law firm Hogan Lovells’ advice to the Government of Ukraine on a landmark mineral rights agreement with the United States reflects the intersection of business and geopolitics, as the U.S. administration seeks to package support for Ukraine’s security with privileged access to the rare earth minerals it possesses. This comes in the form of a joint Reconstruction Investment Fund, requiring M&A and Finance teams with cross-jurisdictional expertise to provide bespoke assistance to both parties in the context of a bilateral treaty between two sovereign states. Here, commercial law firms with corporate expertise and international public law acumen are positioned to facilitate such agreements. Hogan Lovells’ own Geopolitical Risk and National Security Initiative demonstrates how advice to governments and involvement in the defence sector are no longer a complementary feature of the services commercial law firms provide, or conducted on an ad hoc basis, but instead are becoming an integral part of their operations.
Finally, sanction compliance demonstrates how black letter law, the basis of a legal subject, is essential to ensuring the efficacy of Western attempts to inflict damage upon the Russian economy, both to debilitate its war effort and bring the Kremlin to the negotiating table. Sanctions on trade with Russia targeting critical industries such as technology and energy are far from straightforward to enforce. Geographically fragmented and complex supply chains often involving third-party licenses in these critical industries make legal protections for companies and vigilant internal monitoring crucial. Contractual clauses requiring controls over restricted software and technology and targeted “No-Russia clauses” are examples of how legal provisions can mitigate risk for clients. At the same time, firms are increasingly looking to include additional services such as Risk Advisory capabilities to provide comprehensive solutions for clients; offering advice on sanction compliance further highlights the need for this. Whilst fee-earners supporting clients with navigating sanctions have their financial interests and avoiding punishment for non-compliance at heart, the broader effect of this work assists European governments’ attempts to strangle the Russian economy, who simply do not have the resources alone to do so. This makes private sector legal advice effectively a tool of statecraft.
Some may argue that the activities of commercial law firms mould to reflect the economic circumstances of the time, and that the importance of the defence sector to their activities is a temporary reflection of conflict in Europe and growing global geopolitical threats. I disagree, even if it is true that the work of City firms is closely linked to the economic environment. This is because the wider trend of governments integrating foreign policy with security and economic prosperity points to a pivotal role that global commercial law firms, with multi-jurisdictional and sector-specific expertise, have in shaping and enabling this increasingly interconnected policy environment. Operating at the intersection of government and business, and as the architects behind business outcomes, commercial lawyers will continue to play an unexpected role in confronting the major security and geopolitical challenges of our time.
Jude Petrie
Jude Petrie, BA (Cantab) is the Executive Assistant to the Chairman of the Alphen Group, a defence-based network and platform for discussion formed by Professor Dr. Julian Lindley-French PhD, MA, FRHistS of more than 70 leading strategic thinkers from over 16 countries.