The Canadian government has chosen a German defense company to build its navy’s new submarine fleet, in one of Canada’s largest military procurement deals ever.

Prime Minister Mark Carney announced on Monday that the government had chosen the company TKMS for the multi-million pound contract for 12 vessels.

The announcement comes just before Carney leaves for a NATO summit in Turkey, where members are expected to face pressure to show they are boosting defense investment.

Since taking office, Carney has raised Canada’s defense spending to 2% of gross domestic product (GDP) and has pledged to reach 5% by 2035.

On Monday in Halifax, Nova Scotia, Carney said the government would enter into negotiations with TKMS to sign a contract, which could take several months.

“This project is about much more than acquiring submarines,” Carney said. “Builds Canadian industrial capacity.”

TKMS, the world’s largest non-nuclear submarine manufacturer, was competing with South Korea’s Hanwha Ocean shipbuilding company for the submarine bid.

The latest submarine fleet is part of Carney’s effort to increase military spending and aims to bolster the country’s maritime sovereignty, especially in the Arctic.

US President Donald Trump has pressured 32 members of the NATO military pact to increase defense spending.

Canada announced in July 2024 that it was looking for a contractor to build the new submarine fleet, and Carney said he would decide the winner to replace the country’s aging Victoria-class vessels, purchased in 1998, in June of this year.

The submarine contract gives Carney “significant credibility” in his efforts to show he is increasing defense spending, said David Perry, president of the Canadian Institute of Global Affairs.

“He committed to moving the project forward on a very fast schedule, surprisingly fast by Canadian standards, and he appears to have delivered,” he said. “This project will correspondingly accelerate our central defense.”

Perry said the Canadian government was focused on awarding the contract to a country with which it wanted to create a strategic partnership. Carney has sought to strengthen economic and security ties with Europe, as Canada faces trade tensions with the United States, its former ally to the south.

TKMS has said its bid, a joint partnership with Norway, offered “Canada an economically transformative, NATO-aligned, low-risk solution” in an agreement that allows for sharing maintenance and repair, training, logistics and operations.

Perry added that the new ships will give Canada a “massive increase” in its maritime capabilities.

“It should allow a fleet of three submarines to be reliably operational at any given time,” Perry said. “That’s a huge increase in capability over an occasionally operational submarine, which has been our reality for several years.”

The Canadian government has said the new submarines, which will have conventional propulsion and under-ice capabilities, are critical to the security and sovereignty of a nation with the world’s largest coastline.