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OFFSET IN POLAND LESSONS LEARNED LEGAL ISSUES

OFFSET IN POLAND LESSONS LEARNED LEGAL ISSUES. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007. Presented by Łukasz KANIUKA Department of Offset Programmes MINISTRY OF ECONOMY REPUBLIC OF POLAND.

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OFFSET IN POLAND LESSONS LEARNED LEGAL ISSUES

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  1. OFFSET IN POLANDLESSONS LEARNEDLEGAL ISSUES 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 Presented by Łukasz KANIUKA Department of Offset Programmes MINISTRY OF ECONOMY REPUBLIC OF POLAND

  2. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 OFFSET IN POLAND - LEGAL ENVIRONMENT • 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 Lessons learned Legal issues

  3. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 OFFSET ADMINISTRATION MINISTER OF ECONOMY (monitoring and supervision over offset agreements) DEPARTMENT OF OFFSET PROGRAMMES (administrative unit) COMMITTEE FOR THE OFFSET AGREEMENTS (ADVISORY BODY) OFFSET IN POLAND Lessons learned Legal issues

  4. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 PERFORMANCE OF OFFSET 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 OFFSET IN POLAND Lessons learned Legal issues

  5. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 WHY TO AMEND OFFSET ACT ? • EXPERIENCE AND FINDINGS REGARDING MONITORING OF OFFSET AGREEMENTS • FORTHCOMING NEW OFFSET AGREEMENTS • PURPOSE OF OFFSET ACT AMENDMENT • MORE EFFECTIVE OUTCOMES FROM FULFILMENT OF OFFSET AGREEMENTS IN ORDER TO BENEFIT ECONOMIC DEVELOPMENT IN POLAND OFFSET IN POLAND Lessons learned Legal issues

  6. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 KEY ELEMENTS OF AMENDMENT - I • NEW PROCEDURE AIMING AT CONCLUSION OF OFFSET AGREEMENTS • rights and obligations (pointed out precisely) • guidelines for offset offer (award criteria in defence procurement) • offset offer includes only agreed (with offsetees) offset commitments • possibility of exclusion of offset bidder and continuation of procedure with the next best offset bidder • defence contract cannot be conluded before offset contract (before amendment offset contract should be concludedup to 60 days after defence contract) OFFSET IN POLAND Lessons learned Legal issues

  7. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 KEY ELEMENTS OF AMENDMENT - II • LIST OF ARMAMENT (regulation for the purpose of the offset act) • FULFILMENT OF THE DIRECT OFFSET (enterpreneurs also from private sector enabled to fulfil direct offset commitments, before amendment - closed list of companies included in regulation of Council of Ministers) • CATALOGUE OF OFFSET NEEDS (aim – to create a list of offset projects, conducted by Minister of Economy) OFFSET IN POLAND Lessons learned Legal issues

  8. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 KEY ELEMENTS OF AMENDMENT - III • OFFSET COMMITMENT PROMISE (negotiated offset projects promised to be included in forthcoming offset agreements) • NEW DEFINITIONS (awarding entity, foreign supplier, offsetor, technology transfer) • FOREIGN SUPPLIER’S RANGE OF LIABILITY (detailed regulation transferred from offset act to offset agreements) • OFFSET AGREEMENTS (general provisions) DISCLOSED TO PUBLIC OPINION OFFSET IN POLAND Lessons learned Legal issues

  9. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 EXPECTED OUTCOMES • Rationalization of procedure aiming at conlusion of offset agreement • Premeditated offset offers (offset commitments) • Offset influence on procedure of defence procurement • Development of small and medium sized sector including defence sector NEW REGULATION - OFFSET MULTIPLIERS • Sectors vital for Polish economy – precisely indicated • Better differentiation of offset multipliers • Technologies, investments, R&D - preferred • Foreign suppliers motivated to fulfil sophisticated offset commitments OFFSET IN POLAND Lessons learned Legal issues

  10. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 OFFSET 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 valueof 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 ofEconomy 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 OFFSET IN POLAND Lessons learned Legal issues

  11. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 OFFSET 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) OFFSET IN POLAND Lessons learned Legal issues

  12. FINANCIAL CONTRIBUTION TO A COMPANY PURCHASE OF SHARES FROM THE STATE TREASURY CONCLUSION & PERFORMANCE OF - SALES- DELIVERY CONTRACT- LICENCE - KNOW-HOW OFFSET COMMITMENTS PROJECTSWHICH FOREIGN SUPPLIER (OFFSETOR) PERFORMS ACCORDING TO SPECIFICATION INCLUDED IN OFFSET AGREEMENT OBJECT OF OFFSET COMMITMENT - PRECISELY DEFINED IN REGULATION OF COUNCIL OF MINISTERS CONCLUSION & PERFORMANCE OF OTHER CONTRACT FOR THE TRANSFER OF RIGHTS OR PERFORMANCE OF SERVICES 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 OFFSET IN POLAND Lessons learned Legal issues

  13. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 OFFSET 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) OFFSET IN POLAND Lessons learned Legal issues

  14. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 DIRECT OFFSET COMMITMENTS - EXAMPLES • Offset Agreement with LOCKHEED MARTIN Corp.: umowa offsetowa z Lockheed Martin Corporation (LMC): starting inZM 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. OFFSET IN POLAND Lessons learned Legal issues

  15. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 OFFSET 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 OFFSET IN POLAND Lessons learned Legal issues

  16. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 OFFSET AGREEMENTS IN POLAND - 2 2004: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 USD AND 1,1 BLN EUR OFFSET IN POLAND Lessons learned Legal issues

  17. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 OFFSET – INTERNATIONAL ISSUES • July 1st, 2006: POLAND - pMS in „CODE OF CONDUCT ON DEFENCE PROCUREMENT”(forthcoming harmonization of offsets requirements) • INTERPRETATIVE COMMUNICATIONissued on December 7th, 2006(restrictive application of art. 296 TEC) • 2007: EU prepares possible DIRECTIVE on DEFENCE PROCUREMENT(not covered by art. 296 TEC) OFFSET IN POLAND Lessons learned Legal issues

  18. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 CONCLUSIONS • 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 OFFSET IN POLAND Lessons learned Legal issues

  19. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 CONTACT INFORMATION 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:tadeusz.pyrcak@mg.gov.pl OFFSET IN POLAND Lessons learned Legal issues

  20. 3rd International Seminar on Offset and Industrial Cooperation Jerusalem, 7th-9th May 2007 Presented by Łukasz KANIUKA Ministry of Economy Republic of Poland lukasz.kaniuka@mg.gov.pl Thank you for your kind attention OFFSET IN POLAND Lessons learned Legal issues

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