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Cross Analysis on Compensatory Measures in International Public Procurements Contracts

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Cross Analysis on Compensatory Measures in International Public Procurements Contracts Manufacturing in Myamar Photo credits: Christian SYLVAIN Cross analysis on Compensatory measures in international public procurements contracts This is the first step which is a cross analysis between 8 levels of criteria and the 11 selected countries. The objectives were to make an inventory of offsets practices and determine common principles of offsets. WORLD BANK COMMITTEEEDITED BY THE EUROPEAN CLUB FOR COUNTERTRADE AND OFFSET Cross analysis on Compensatory Measures in International Public Procurements contracts TABLE OF CONTENTS INTRODUCTION ......................................................................................................................................................... 3 CONCEPT NOTE ......................................................................................................................................................... 9 LEVEL 0: ECONOMIC DATA ......................................................................................................... 13 LEVEL 1: International institutions & public procurement measures ........................ 15 LEVEL 2: Regional/ multi / bilateral agreements on government procurement signed with other countries ...................................................................................................... 16 LEVEL 3: Inventory of national legislation and rules applicable at national levels on government procurement .................................................................................................... 22 LEVEL 4: Offsets rules at national level ................................................................................. 30 LEVEL 5: COMPARATIVE OFFSETS REQUIREMENTS .......................................................... 34 LEVEL 7: Cultural, regional and political organization .................................................... 41 LEVEL 8: Comparison between Uncitral model law on public procurement (2011) and national public procurement laws ................................................................................. 48 AUSTRALIA ...................................................................................................................................... 57 BRASIL .............................................................................................................................................. 58 CANADA ............................................................................................................................................ 60 KUWAiT ............................................................................................................................................ 65 INDIA ................................................................................................................................................. 68 PERU .................................................................................................................................................. 71 RUSSIA .............................................................................................................................................. 73 SOUTH AFRICA ............................................................................................................................... 76 SOUTH KOREA ................................................................................................................................ 79 TURKEY ............................................................................................................................................ 82 UAE ..................................................................................................................................................... 84 Reproduction and distribution prohibited without prior and written authorization from the European 2 Club for Countertrade and Offset November 2016 Cross analysis on Compensatory Measures in International Public Procurements contracts INTRODUCTION What Are Offsets? There is no single, agreed upon definition of offsets. However, the World Trade Organization (WTO) Agreement on Government Procurement (GPA), which limits, and, outside of the defense sector, prohibits, the use of offsets by its members, defines an offset as “any condition or undertaking that encourages local development or improves a Party’s balance-of-payments accounts, such as the use of domestic content, the licensing of technology, investment, countertrade and similar action or requirement.” Related terms include compensatory trade agreements, coproduction, barter, and buy backs. The term “offset” is most often used in the aerospace and defense industry, whereas other terms, such as countertrade, may be used in other sectors. More colloquially, offsets are commonly defined as nonstandard contracts that require, as a condition for the sale of goods or services, that the vendor transfer a form of economic activity to the buyer’s government. In shorthand, that means that offsets are side agreements, or sweeteners, ancillary to a government contract that provide additional benefits to the buyer. Offsets are generally used by purchasing governments to reduce the cost (at least as perceived by their constituents) of procurement from abroad and/or to achieve related or unrelated policy goals, such as advancing the state of domestic industry or broader domestic development goals. Momentum in countering the growth of offsets has stalled since the period of trade liberalization that resulted in the WTO-GPA civil offset ban in 1994. The 2012 revision to the GPA did not close the loopholes that allowed offsets to continue in the interim. More recently, in the global defense marketplace, offsets have played a particularly significant role in the competitive landscape as defense budgets in the United States and Europe have been slashed and producers seek new markets abroad. As a result, at least for the foreseeable future, it appears that offsets are here to stay, and that parties engaged in the international defense trade should understand the basics of offsets, as well as the legal and compliance pitfalls that can be associated with them. Legal field of offsets: the World can be divided into 3 parts: USA (Buy American Act), developing & emerging countries (GPA 1994, revised 2014), Europe (GPA 1994, art. 18; TFEU, for civil contract 2004/17/EC/directive, 2009/81/EC/directive – for defense 2009/81/EC). Reproduction and distribution prohibited without prior and written authorization from the European 3 Club for Countertrade and Offset November 2016 Cross analysis on Compensatory Measures in International Public Procurements contracts THE GLOBAL FORUM COMMUNITY OF PRACTICE ON “COMPENSATORY MEASURES IN INTERNATIONAL GOVERNMENT PROCUREMENT CONTRACTS” Objectives A standalone Community of Practice (CoP) dedicated to the compensatory measures in international government procurement contracts was created on the 29th October 2013 in the framework of the GFLJD (Global Forum on Law, Justice and Development). The GFLJD1 is a permanent, global forum, with its Secretariat housed at the World Bank, which seeks to connect experts and stakeholders from around the world, and which provides a mechanism for continual and efficient knowledge exchange as well as for the cogeneration of innovative solutions to development challenges based on efficiency, equity and justice. The GFLJD aims to facilitate the identification, discussion, production and/or sharing of innovative and customized legal and institutional tools to address global, regional or national development challenges. Based on the areas of interest expressed by the GFLJD Partners, five Thematic Working Groups (TWGs) and relative Thematic Working Sub-groups (TWSs) were launched in April 20122. Along the way, new TWSs and CoPs were established. Each TWG is to identify key challenges in its area and to generate outputs that address these challenges. All of the TWGs have made substantial progress in the identification process, as part of their work planning. Although there have been colloquia, meetings and presentations, only a few publishable outputs have been produced. In addition to standalone CoPs, the work of the TWGs is generally led by COPs. After submitted a concept note on offsets practices as a major development challenge, the standalone COP on compensatory measures in international government procurement contracts was created with the commitment to produce targeted knowledge products representing innovative legal solutions to the challenges identified. The purpose of the CoPs on offsets issues is to develop fruitful and constructive dialogue between the different methodological trends and to propose a comprehensive draft to create a model law (UNCITRAL) . The CoP has 3 areas of exploration: • 1. Firstly, defining the relevant field:- o Inventorying work carried out, and attempting to define offset and its common principles and technical complexity; 1 It seeks to: (1) promote a better understanding of the role of law and justice in the development process, through structured South-South and North-South dialogues amongst relevant stakeholders and a research agenda that will facilitate and support the co-generation of knowledge; (2) strengthen and better integrate legal and judicial institutions in the development process, by carrying out relevant capacity building initiatives; and (3) provide access to an open repository of knowledge. The GFLJD will set measurable, sustainable goals for itself in these areas, and evaluate its progress. The forum is organized thematically.
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