Sweden becomes the first country to set a “democracy clause” on its €1bn arms exports industry.

The government and the opposition have reached consensus over a law to prohibit arms sales to dictatorships with a substandard human rights record, Swedish Radio reported on Monday.

The “democracy clause” is expected to pass on Thursday, following an agreement between the government and the center-right opposition Alliance. The clause would outlaw sales to regimes such as Saudi Arabia, Oman, and the United Arab Emirates, where Swedish manufacturers have secured contracts in the past. Sales to such regimes may account for 20-25% of their sales, although exports are directed to the EU, Norway, South Korea, the United States, and Canada.

The bill fulfills a programmatic agreement between the ruling Social Democrats and their junior coalition partners, the Green Party.

However, the opposition Christian Democrats expressed their disappointment Sweden the bill does not impose a flat ban on arms sales to dictatorships. But, the Moderate Party’s defense spokesman, Hans Wallmark, expressed his satisfaction for a law that will not totally undermine Sweden’s defense industry.

The President of Saab, Håkan Buskhe, has warned that the “democracy clause, could mean that the company moves some of its production abroad while warning that fewer exports could raise the cost of production for the Swedish armed forces.