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Offset in Poland – when and how? Basic rules

The defence procurement path in Poland includes three main choices. Public procurement is a default choice but in practice...

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The defence procurement path in Poland includes three main choices. Public procurement is a default choice but in practice it is rarely used.

The first choice is defence public procurement regulated by Public Procurement Law (art. 131a-131w).

The second is procurement under the Ministry of Defence (MoD) procedures – regulated mainly by MoD decision No 367/MON (in Polish only).

The third option is government to government (G2G) contract – there is no dedicated regulation for such contracts.

The defence public procurement is a default procedure, however, there are many exemptions allowing to avoid it, including the main exemption related to the procurement of an arm, munitions or war materials provided for in art. 346 of the EU Treaty if required by primary national security interest.

Offset cannot be requested in the defence procurement under the public procurement rules.

The Polish law provides detailed regulation on the terms of evaluating the existence of the primary national security interest and justifying the application of the said exemption. If such justification is prepared, it opens the way for procurement under the MoD procedure. Offset is not an obligatory element of such procurement – it is an option that requires a separate justification. However, when there is no offset, the contract may include a specific obligation related to the transfer of technology.

The use of an offset must be justified independently in accordance with the Council of Ministers regulation dated 1 December 2014 (in Polish only). The regulation determines the procedure and rules of conduct with respect to preparing the justification and assessing the necessity of using an offset for the protection of essential national security interests. The purpose of the regulation is to ensure the proper application of Article 346.1.b of the TFEU.

Article 346 (ex Article 296 TEC)

1. The provisions of the Treaties shall not preclude the application of the following rules: (…)
(b) any Member State may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war material; such measures shall not adversely affect the conditions of competition in the internal market regarding products which are not intended for specifically military purposes.

Offset itself is regulated by the Act of 26 June 2014 on Certain Agreements Concluded in Connection with Contracts Essential for National Security (if you need English translation of this Act send me an e-mail). This offset law applies to all offset procedures started after 30 July 2014.

Offset requirements must be directly related to the procured goods or services and to the need of establishing production or service capabilities in Poland.

The offset contracting includes preparing the offset specification, submitting an offset offer, negotiations. the conclusion of the offset agreement and establishing the contractual performance security and renegotiations.

If you are interested in offset in Poland, please let me know.

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