Toronto. Canada selected Germany’s ThyssenKrupp Marine Systems on Monday to build 12 submarines, one of its largest military purchases, as it boosts defense spending to meet NATO targets.

The decision came before Prime Minister Mark Carney headed to this week’s NATO summit, where allies face pressure to back higher defense spending with concrete plans.

“As part of our commitments to defend Canada and support our allies, I am pleased to announce that Canada has selected TKMS as the preferred supplier for Canada’s Patrol Submarine Project,” Carney said.

The German company beat South Korea’s Hanwha Ocean for the contract. ThyssenKrupp said its submarines would strengthen interoperability because many NATO allies already operate its conventionally powered vessels.

Carney has pledged to raise defense spending to 5% of gross domestic product by 2035 after Canada reached NATO’s previous 2% spending target this year.

The new fleet will replace Canada’s four aging Victoria-class submarines, which were purchased secondhand from the United Kingdom in the late 1990s.

No US company bid because the United States builds only nuclear-powered submarines, while Canada sought conventionally powered diesel-electric vessels.