OFFSET IN POLAND LESSONS LEARNED LEGAL ISSUES 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 Presented by Łukasz

OFFSET IN POLANDOFFSET IN POLAND LESSONS LEARNEDLESSONS LEARNED

LEGAL ISSUESLEGAL ISSUES

3rd International Seminar on Offset and Industrial Cooperation 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007Jerusalem, 7th-9th May 2007

Presented by Presented by

Łukasz KANIUKAŁukasz KANIUKA

Department of Offset ProgrammesDepartment of Offset Programmes

MINISTRY OF ECONOMYMINISTRY OF ECONOMY

REPUBLIC OF POLANDREPUBLIC OF POLAND

OFFSET IN POLAND Lessons learned Legal issues

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Act of September 10th, 1999 on certain compensation

agreements conluded in connection with supply contracts

for the needs of national defence and security

(Dz. U. of 1999 No 80, pos. 903 with further revisions)

Regulation of the Council of Ministers of July 2nd, 2002

regarding detailed principles for granting credit for offset

commitments of a foreign supplier of armament or

military equipment towards the value of the offset

agreement

(Dz. U. of 2002 No 100, pos. 907)

OFFSET IN POLAND OFFSET IN POLAND - LEGAL ENVIRONMENT - LEGAL ENVIRONMENT



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OFFSET ADMINISTRATIONOFFSET ADMINISTRATION

MINISTER OF ECONOMY ((monitoring and supervision monitoring and supervision over offset agreements over offset agreements))

DEPARTMENT DEPARTMENT OF OFFSET PROGRAMMES OF OFFSET PROGRAMMES

((administrative unitadministrative unit))

COMMITTEE COMMITTEE FOR THE OFFSET FOR THE OFFSET

AGREEMENTS AGREEMENTS ((ADVISORY BODYADVISORY BODY))



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PERFORMANCE OF OFFSET PERFORMANCE OF OFFSET AGREEMENTS – PRACTICAL ASPECTS AGREEMENTS – PRACTICAL ASPECTS

Definition of offset needs

Improper quality of offset offers

Time limitation regarding negotiations (up to 60 days)

Optimistic declarations of foreign suppliers

Overestimated expectations of offset beneficiaries

Offsetees condition (direct offset)

Expectation of immediate benefits

Difficulties in fulfiling „sophisticated” offset commitments

Difficulties in fulfiling direct offset commitments

Insufficient knowledge of offset aspects – improper info policy



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WHY TO AMEND OFFSET ACT ?WHY TO AMEND OFFSET ACT ? EXPERIENCE AND FINDINGS EXPERIENCE AND FINDINGS

REGARDING MONITORING REGARDING MONITORING OF OFFSET AGREEMENTSOF OFFSET AGREEMENTS

FORTHCOMING NEW OFFSET AGREEMENTSFORTHCOMING NEW OFFSET AGREEMENTS

PURPOSE OF OFFSET ACT AMENDMENT PURPOSE OF OFFSET ACT AMENDMENT MORE EFFECTIVE OUTCOMES MORE EFFECTIVE OUTCOMES

FROM FULFILMENT OF OFFSET AGREEMENTS FROM FULFILMENT OF OFFSET AGREEMENTS

IN ORDER TO BENEFIT ECONOMIC DEVELOPMENT IN ORDER TO BENEFIT ECONOMIC DEVELOPMENT

IN POLANDIN POLAND



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KEY ELEMENTS OF AMENDMENT - IKEY ELEMENTS OF AMENDMENT - I NEW PROCEDURE AIMING AT NEW PROCEDURE AIMING AT

CONCLUSION OF OFFSET AGREEMENTSCONCLUSION OF OFFSET AGREEMENTS rights and obligations (pointed out precisely) rights and obligations (pointed out precisely)

guidelines for offset offer (award criteria guidelines for offset offer (award criteria in defence procurement) in defence procurement)

offset offer includes only agreed (with offsetees) offset offer includes only agreed (with offsetees) offset commitmentsoffset commitments

possibility of exclusion of offset bidder and continuation possibility of exclusion of offset bidder and continuation of procedure with the next best offset bidder of procedure with the next best offset bidder

defence contract cannot be conluded defence contract cannot be conluded before offset contract before offset contract (before amendmentbefore amendment offset contract should be concludedup to 60 days after defence contract)



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KEY ELEMENTS OF AMENDMENT - IIKEY ELEMENTS OF AMENDMENT - II

LIST OF ARMAMENT LIST OF ARMAMENT (regulation for the purpose of the offset act)(regulation for the purpose of the offset act)

FULFILMENT OF THE DIRECT OFFSET FULFILMENT OF THE DIRECT OFFSET (enterpreneurs also from private sector enabled to fulfil direct (enterpreneurs also from private sector enabled to fulfil direct offset commitments, offset commitments, before amendment - closed list of before amendment - closed list of companies included in regulation of Council of Ministerscompanies included in regulation of Council of Ministers) )

CATALOGUE OF OFFSET NEEDS CATALOGUE OF OFFSET NEEDS (aim – to create a list of offset projects, (aim – to create a list of offset projects, conducted by Minister of Economy)conducted by Minister of Economy)



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KEY ELEMENTS OF AMENDMENT - IIIKEY ELEMENTS OF AMENDMENT - III OFFSET COMMITMENT PROMISE OFFSET COMMITMENT PROMISE

(negotiated offset projects promised to be included (negotiated offset projects promised to be included in forthcoming offset agreements)in forthcoming offset agreements)

NEW DEFINITIONS NEW DEFINITIONS (awarding entity, foreign supplier, (awarding entity, foreign supplier, offsetor, technology transfer)offsetor, technology transfer)

FOREIGN SUPPLIER’S RANGE OF LIABILITY FOREIGN SUPPLIER’S RANGE OF LIABILITY (detailed regulation transferred from offset act to offset agreements)

OFFSET AGREEMENTS (OFFSET AGREEMENTS (general provisionsgeneral provisions) ) DISCLOSED TO PUBLIC OPINIONDISCLOSED TO PUBLIC OPINION



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EXPECTED OUTCOMES EXPECTED OUTCOMES Rationalization of procedure Rationalization of procedure

aiming at conlusion of offset agreementaiming at conlusion of offset agreement

Premeditated offset offers (offset commitments)Premeditated offset offers (offset commitments)

Offset influence on procedure of defence procurement Offset influence on procedure of defence procurement

Development of small and medium Development of small and medium sized sector including defence sectorsized sector including defence sector

NEW REGULATION - OFFSET MULTIPLIERS NEW REGULATION - OFFSET MULTIPLIERS Sectors vital for Polish economy – precisely indicatedSectors vital for Polish economy – precisely indicated

Better differentiation of offset multipliersBetter differentiation of offset multipliers

Technologies, investments, R&D - preferredTechnologies, investments, R&D - preferred

Foreign suppliers motivated to fulfil Foreign suppliers motivated to fulfil sophisticated offset commitmentssophisticated offset commitments



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OFFSET AGREEMENT – PRINCIPLESOFFSET AGREEMENT – PRINCIPLES

Offset agreement – obligatory when the value of contract for delivery of armament or military equipment exceeds 5 mln euro for one foreign supplier in three years’ time

Total value (with offset multipliers) of the offset agreement shall not be lower than value of the supply contract

Total value of direct offset commitments shall not be lower than half of the value of the offset agreement

Offset agreement – signed between the State Treasury represented by Minister of Economy and the foreign supplier

Concluded for a period not longer than ten years

Approved by the Council of Ministers

Supervised and monitored by Minister of Economy



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OFFSET COMMITMENTSOFFSET COMMITMENTS

• DIRECT – addressed to licensed companies dealing within the sphere of manufacturing and the turnover of explosives, weapon, ammunition, as well as products and technologies designated for military or police purposes

• INDIRECT

– addressed to any other company registered in Poland

• POTENTIAL

- direct or indirect offset commitments

(potential project not covered by terms of liability)



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PURCHASE OF SHARES FROM PURCHASE OF SHARES FROM THE STATE TREASURYTHE STATE TREASURY

FINANCIAL CONTRIBUTION FINANCIAL CONTRIBUTION TO A COMPANYTO A COMPANY

CONCLUSION & PERFORMANCE OF CONCLUSION & PERFORMANCE OF - SALES- SALES- DELIVERY CONTRACT- DELIVERY CONTRACT- LICENCE - LICENCE - KNOW-HOW - KNOW-HOW

CONCLUSION & CONCLUSION & PERFORMANCE PERFORMANCE

OF OTHER CONTRACT OF OTHER CONTRACT FOR THE TRANSFER FOR THE TRANSFER

OF RIGHTS OR OF RIGHTS OR PERFORMANCE PERFORMANCE

OF SERVICESOF SERVICES

OFFSET OFFSET COMMITMENTSCOMMITMENTS

PROJECTSWHICH FOREIGN SUPPLIER (OFFSETOR) PERFORMS ACCORDING TO SPECIFICATION INCLUDED IN OFFSET AGREEMENT

OBJECT OF OFFSET COMMITMENT - PRECISELY DEFINED IN REGULATION OF COUNCIL OF MINISTERS



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OFFSET MULTIPLIERSOFFSET MULTIPLIERS

MULTIPLIERS :

0,5 – 2

2 – 5 (used in cases justified by the interest

of economy or security and defence of the State)

OFFSET MULTIPLIER

> 2 - 5: PRECISE VALUE INDICATED IN GUIDELINES FOR OFFSET OFFER (new regulation)



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Offset Agreement with LOCKHEED MARTIN Corp.: umowa offsetowa z Lockheed Martin Corporation (LMC): starting in ZM MESKO S.A. production of up-to-date ammunition, unguided rocket systems and utilisation of outdated ammunition; offset commitments addressed to: ZM Dezamet S.A., Kombinat PZL-Hydral S.A.

Offset Agreement with RAFAEL – technology transfer to ZM MESKO S.A. resulting in starting production of up-to-date elements of weapons

Offset Agreement with THALES – technology transfer to RADMOR S.A. – modernization of radio station VHF PR4G.


DIRECT OFFSET COMMITMENTS DIRECT OFFSET COMMITMENTS - EXAMPLES- EXAMPLES


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OFFSET AGREEMENTS IN POLAND - 1OFFSET AGREEMENTS IN POLAND - 1

2001: EADS-CASA

(C295 transport aircrafts) – 306,36 mln USD

GEIE Eurotorp

(light torpedos) – 26,99 mln EUR

THALES Nederland B.V

(systems for ORKAN class ships) – 76,28 mln EUR

2003: LOCKHEED MARTIN Corp.

(F-16 aircrafts) – 6,028 bln USD

PATRIA Vehicles Oy

(AWV) – 482,00 mln EUR

OTO MELARA S.p.A.

(AWV – gun turrets) – 308,71 mln EUR


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OFFSET AGREEMENTS IN POLAND - 2OFFSET AGREEMENTS IN POLAND - 22004: RAFAEL Armament Dev. Auth. Ltd.

(anti-tank guided missiles) – 440,00 mln USD

2006: HARRIS Corp.

(digital radio stations) – 10,49 mln USD

NAMMO A.S.

(12,7 mm & 30 mm ammunition) – 70,96 mln EUR

SAAB Bofors Dyn. AB

(RBS 15Mk3 missile) – 127,30 mln EUR

2007: AVIO S.p.A.

(gas turbine for corvette ship) – 9,76 mln EUR

TOTAL VALUE OF OFFSET AGREEMENTS:

6,78 BLN USD6,78 BLN USD AND 1,1 BLN EUR1,1 BLN EUR


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OFFSET – INTERNATIONAL ISSUESOFFSET – INTERNATIONAL ISSUES

July 1st, 2006: POLAND - pMS in

„CODE OF CONDUCT ON DEFENCE PROCUREMENT”

(forthcoming harmonization of offsets requirements)

INTERPRETATIVE COMMUNICATION

issued on December 7th, 2006

(restrictive application of art. 296 TEC)

2007: EU prepares possible

DIRECTIVE on DEFENCE PROCUREMENT

(not covered by art. 296 TEC)



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CONCLUSIONSCONCLUSIONS

Vital role of definition of offset needs

and redifined guidelines for offset offers

Negotiations – worth doing well

Exchange of information with foreing offsets administration

Monitoring of EU (esp. European Defence Agency)

endavours within the framework and future of offsets

Exploring by offsets administration

„Public Relation” tools and techniques



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CONTACT INFORMATION CONTACT INFORMATION http://www.mg.gov.pl/http://www.mg.gov.pl/

MINISTRY OF ECONOMY

DEPARTMENT OF OFFSET PROGRAMMES

Pl. Trzech Krzyży 3/5

00-507 Warsaw POLAND

phone: (+48-22) 628-16-91; 693-50-14

fax: (+48-22) 693-40-56

DIRECTOR

TADEUSZ PYRCAK

e-mail:[email protected]



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Thank you for your kind attention

Presented byŁukasz KANIUKA

Ministry of Economy Republic of Poland

[email protected]


Documents

OFFSET IN POLAND LESSONS LEARNED LEGAL ISSUES 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 Presented by Łukasz