Hanno Pevkur, who has led Estonia's defence ministry since 2022, announced his resignation on 2 September 2026, accepting political responsibility after Estonia's National Audit Office released findings exposing serious flaws in a munitions procurement intended for Ukraine. A parallel criminal investigation has also been opened. Mr Pevkur stated he would remain in a caretaker capacity until parliament reconvenes on 14 September and a successor is confirmed.
The controversy traces back to August 2024, when Estonia's Centre for Defence Investments (ECDI, also known as RKIK) signed the first of four contracts with Datasel SRL, an Italian-registered company, and transferred an advance payment of approximately €15mn (million).
The contracts were aimed at securing artillery shells for Ukraine at a time when Kyiv was facing acute frontline ammunition shortages. The funding source was the European Union's (EU's) European Peace Facility (EPF) a mechanism established to finance military assistance to partner countries outside the EU budget.
A second contract followed in October 2024 with an additional advance of over €10mn. Further agreements signed through the end of 2024 pushed the total advance payments to approximately €70mn all released before verified delivery of usable ammunition.
Who Is Datasel SRL — and the Neco Connection
At the time the first contract was signed, Datasel SRL was a small Italian-registered company with no established track record of producing or delivering artillery shells. Earlier in 2024, it had been acquired by Neco Defence Munitions, a private Indian entity based in Nagpur whose promoters are connected to the promoter family of Jayaswal Neco Industries Limited a listed steel and castings manufacturing company.
Neco Defence Munitions is a separate private entity, not a subsidiary or division of the listed company. Jayaswal Neco Industries Limited has explicitly clarified that it holds no direct corporate or financial stake in Datasel SRL and that the controversy carries no financial impact on the listed entity.
Neco Defence Munitions had acquired Datasel to build an international defence supply arm. At the time of the Estonian contracts, neither Datasel nor its new parent had a documented record of artillery ammunition supply.
Red Flags Ignored: More Contracts despite Early Delays
The first delivery of projectiles was expected in Ukraine by November 2024. Deliveries did not arrive on schedule. Estonian public broadcaster ERR reported that Datasel was experiencing production difficulties and falling behind.
Despite these early warning signs, ECDI signed two additional contracts and continued releasing advance payments ultimately committing close to €70mn in public funds before a single verified, compliant batch had been delivered.
When shipments finally arrived in 2025, Estonian media outlet Eesti Ekspress reported that the ammunition failed to meet required quality standards, and that usable shells did not reach Ukrainian forces as planned.
Datasel SRL and Neco Defence Munitions have forcefully rejected all allegations of wrongdoing. Through their lawyer, the companies have alleged that the breakdown in the deal was caused not by failures in the quality of the ammunition, but by changes in European regulations and funding arrangements that were applied after the contracts were in place. The companies have characterised ECDI's decision to terminate the contracts as 'contradictory and illogical'.
Datasel's lawyer stated that ECDI was "unable to accept the remaining goods" framing the rejection as a contractual and regulatory dispute rather than a product quality failure.
This claim is relevant in the context of the EU's broader ammunition regulatory landscape. The EU's Act in Support of Ammunition Production (ASAP), active from July 2023 to June 2025, mobilised €500 million to ramp up artillery shell manufacturing across Europe and introduced specific production, certification, and delivery criteria for EU-funded procurement. Critics of Estonia's procurement process have noted that the ASAP framework's evolving requirements — covering production standards, testing certification, and eligible suppliers created shifting compliance conditions for contracts signed in mid-2024 under European Peace Facility funding.
Estonia has not publicly confirmed or detailed what specific standard or regulation Datasel is alleged to have failed. ECDI's position is that the ammunition that arrived was of insufficient quality and deliveries were incomplete.
A Procurement without Standard Safeguards
The National Audit Office findings, and the broader coverage, point to a fundamental failure in process. Conventional defence procurement for sensitive contracts especially artillery ammunition typically requires suppliers to pass through prequalification stages before any advance payment is released: verification of manufacturing capability, sample batch testing, factory audits, and third-party technical certification.
None of these standard verification steps appear to have been applied before ECDI signed contracts and transferred tens of millions in advance funds to a company with no documented artillery supply history.
Defence minister Pevkur, in an interview with Estonian Television's current-affairs programme Aktuaalne kaamera, confirmed that he had not read the artillery contracts before they were executed. He stated that contract negotiations and the selection of contracting partners were RKIK's operational responsibility, not the minister's. He added that the two permanent secretaries of the day had been informed.
Datasel's Counterclaim and the Arbitration
Rather than quietly absorbing the termination, Datasel has gone on the offensive. The company says it delivered ammunition worth approximately €59mn to the Estonian state before its contracts were terminated in November 2025, and invoiced a comparable amount.
Datasel has filed a counterclaim against Estonia, seeking damages running into tens of millions of euros for what it describes as the premature and unjustified termination of the contracts.
The principal case is now before the European Court of Arbitration in Strasbourg. Parts of the dispute are also before the Estonian domestic courts. Estonia is said to hold a guarantee issued in India intended to protect against Datasel insolvency, though officials have not disclosed its scope or value.
The total sums remain contested: ECDI places approximately €70mn at stake; Mr Pevkur put the advance payments directly linked to Datasel at around €60mn ; Datasel says it received €59mn and delivered goods of equivalent value.
Estonia is currently pursuing recovery of funds through both domestic courts and international arbitration. No ammunition from this procurement is reported to have reached Ukrainian forces. The European Commission has not indicated whether the European Peace Facility or Estonia's state budget will absorb any unrecovered loss.
The episode forms part of broader criticism of financial controls and risk management within Estonia's defence procurement agencies. A successor to Mr Pevkur is expected to be confirmed after the Riigikogu Estonia's parliament reconvenes on 14 September 2026.
