In an era of rightfully renewed focus on national security and technological sovereignty, the UK defence and security industrial base is under real, urgent and growing pressure to deliver innovation at pace. The MOD’s intent is clear: strengthen the UK’s industrial resilience by nurturing small and mid-sized enterprises (SMEs) to become reliable, enduring contributors to UK and NATO military capability, direct – or indirectly up the supply chain.
Yet for many defence-oriented SMEs, scaling up presents not just commercial opportunities but also a host of legal and operational risks that, if mishandled, can derail even the most promising ventures and plans. From structuring international partnerships and navigating export controls, to protecting IP and operating in or with high-risk jurisdictions, legal risk is not peripheral. It is central.
Defence SMEs seeking to grow must contend with a range of challenges, including:
- Complex multi-jurisdictional contracting
- Regulatory compliance (e.g. ITAR, EAR, UK Export Control Orders)
- Cyber and physical security standards
- Sanctions and supply chain due diligence
- Secure investment and ownership structuring
Incorporation, Governance and Shareholder Structures
Many defence SMEs emerge from technical or entrepreneurial origins and only formalise their governance as scale-up pressures mount. But SMEs should seek such advice from the outset or midstream, developing shareholder agreements, board structures, risk registers and corporate policies that meet both regulatory obligations and investor expectations.
In the defence sector, loosely drafted directors’ agreements can undermine credibility with prime contractors, MOD customers, or institutional investors.
Export Controls, Sanctions & Jurisdictional Risk
UK defence exports reached £10.9bn in 2022. But as more SMEs begin exporting dual-use or military-classified equipment or services, the exposure to licensing regimes, end-user requirements and sanctions compliance grows significantly. Be mindful of:
- ITAR and EAR compliance
- UK Export Control legislation and SPIRE licensing
- UN, EU, UK and US sanctions regimes
- Screening of end users, intermediaries and finance providers
Cybersecurity, Data Handling & Risk Assurance
SMEs bidding into the defence ecosystem must meet stringent standards, including those set by the MOD’s Cyber Essentials Plus scheme, NIST, or ISO/IEC 27001. A law firm can work in tandem with security consultants to ensure clients have the documentation, training, contracts, and incident response policies to satisfy both their legal obligations and their customer expectations.
This is particularly relevant for companies holding sensitive government or classified data, or those with hybrid defence/security products that blur regulatory lines.
Commercial Contracting & Dispute Mitigation
Whether subcontracting to a Tier 1 defence prime or leading a multi-supplier innovation consortium, SMEs need watertight contracts and clearly defined risk allocation. Good commercial law practice supports contract drafting, consortium agreements, IP licensing, NDAs, and cross-border joint ventures—always with an eye on sector-specific sensitivities and international enforcement risks.
Where disputes do arise, such as between partners, investors or with government bodies, look for relevant negotiation experience from those used to some of the world’s most complex operational theatres.
Operating Internationally in High-Risk Markets
For SMEs with aspirations to scale globally (particularly in post-conflict reconstruction, defence sales, logistics or advisory services), highly tailored support is key. This includes legal risk assessments in fragile jurisdictions, compliance with anti-bribery and corruption legislation, and insurance-linked legal planning. This expertise is especially valued in regions like the Middle East, Central Asia, and parts of Sub-Saharan Africa, where legal norms may be variable and operational risk acute.
In summary, scaling in defence is not simply about revenue. It’s about integrity, assurance, and long-term credibility. The SMEs that succeed are those that best embed compliance, governance, and legal foresight into their business models from the outset.
This is where specialist law firms like Proelium Law LLP play a vital and enabling role. Proelium Law is not a conventional law firm. Founded by professionals with extensive experience working with specialist military units, intelligence, legal and international security sectors, it is uniquely equipped to advise companies operating at the cross-roads of law, defence, security, and high-risk commercial environments.
Firms like Proelium Law are force multipliers in this journey. They bring a practical, sector-specific understanding of the regulatory and reputational terrain in which UK defence SMEs must now operate. As Government looks to SMEs to drive forward its “science and technology superpower” ambitions, legal readiness is no longer optional: it is a foundation of trust and access.
If you need advice or legal support contact us.
