Canada has chosen TKMS, a German defence company, to build its new submarine fleet in the largest defence procurement deal in Canadian history. Prime Minister Mark Carney announced the award of a multi-billion-dollar contract for 12 vessels, saying the government is acting quickly and decisively because Canada faces an increasingly “dangerous and divided world.”

Carney’s remarks come ahead of his trip to a NATO summit in Turkey, where member states are expected to face pressure to increase defence investment. Since taking office, Carney has raised Canada’s defence spending to 2% of GDP and has committed to reaching 5% by 2035.

According to the government, only about one in four of Canada’s submarines is currently seaworthy. Carney linked the procurement to broader defence and industrial goals, arguing the project would help build Canadian industrial capacity rather than simply replace aging ships.

The contract will be negotiated before a final agreement is signed, and Carney said the timetable reflects an expedited approach to defence procurement. TKMS, which describes itself as the world’s largest non-nuclear submarine manufacturer, was competing with South Korea’s Hanwha Ocean shipbuilding company.

The new submarines are intended to support Canada’s maritime sovereignty, particularly in the Arctic as warming conditions open new routes and create additional strategic pressure. The government said the vessels will be conventionally powered and designed with under-ice capabilities.

Canada’s submarine replacement effort was first signalled publicly in July 2024, with Carney saying he would make a decision by the following June to replace the Victoria-class submarines, which were acquired starting in 1998. The deal is also part of Carney’s efforts to strengthen security and economic ties with Europe as Canada navigates trade tensions with the United States.