Legal framework

Relevant legislation

What statutes or regulations govern procurement of defence and security articles?

Procurement of defence and security articles in Poland is governed, in principle, by the Act of 29 January 2004 Public Procurement Law (PPL), which implements the EU Defence and Security Directive (2009/81/EC) into Polish law (in particular, Chapter 4a of the PPL).

In cases of the procurement of arms, munitions or war materiel referred to in article 346 of the Treaty on the Functioning of the European Union (TFEU) if the essential interests of national security so require, the PPL does not apply. Instead, the Decision of the Minister of National Defence (the Ministry of Defence) No. 367/MON of 14 September 2015 shall be used. This decision regulates the principles and procedure of awarding contracts to which the provisions of the PPL do not apply. The Decision is supplemented by a number of additional regulations on planning, preparation, justification and approval procedure of defence procurement to which Decision No. 377/MON applies.

The use of the said exemption from the PPL rules may require the application of the Act on Certain Agreements Concluded in Connection with Contracts Essential for National Security of 26 June 2014 (Offset Act). The Act sets out the rules for concluding agreements in connection with the performance of contracts related to the production of or trade in arms, munitions and war materiel, commonly called offset contracts.

The PPL does not apply to procurement of defence and security articles in the situations described in article 4b of the PPL (eg, where the procurement is subject to a special procedure under an international agreement or in case of government-to-government procurement). General principles derived from the EU Treaty also apply to such procurements, including the principles of equal treatment, non-discrimination, transparency, proportionality and mutual recognition.

Identification

How are defence and security procurements identified as such and are they treated differently from civil procurements?

A procurement by a Polish contracting authority (such as the Ministry of Defence) falls within the scope of the PPL when the contract has a value equal to or greater than EU financial thresholds for good and services (from 1 January 2020 this value is €428,000 for goods and services), and €30,000 for works if the procurement covers:

  • the supply of military equipment, including any parts, components or subassemblies;
  • the supply of sensitive equipment;
  • works, supplies and services directly related to the equipment referred to above; or
  • works and services for specifically military purposes or sensitive works and sensitive services.

The procurement will be advertised in the Official Journal of the European Union (OJEU) in case of public procurements having a value equal to or greater than the EU threshold or in the Public Procurement Bulletin in case of public procurements below the EU threshold.

The key differences between procurements carried out under the specific defence rules (in comparison to civil procurement) are:

  • the mechanisms put in place to protect sensitive information, and to ensure defence and security interests are protected (eg, restriction of the range of contractors authorised to obtain classified information);
  • broader catalogue of the circumstances justifying the exclusion of economic operators from the procurement procedure;
  • power of the contracting authority to restrict the involvement of subcontractors in certain situations;
  • limiting the number of contract award procedures which may be applied (only procedures for awarding contracts in which an initial qualification of contractors is possible (eg, restricted tender or a negotiated procedure with prior publication));
  • wider range of tender assessment criteria (other than standard criteria, such as viability, security of supply, interoperability and operational characteristics);
  • additional rights for the contracting authority to reject an offer or cancel the procedure; and
  • differences in the content of contract notices or terms of reference.

Decision 367/MON (applicable if application of the provisions of the PPL is excluded because of the existence of a fundamental security interest state) imposes more stringent requirements regarding procurement. It limits the scope of procurement procedures to just three: negotiations with one supplier, negotiations with several suppliers or exceptionally negotiated procedure with prior publication. In addition, it does not provide the mechanism for appealing the decisions of the contracting entity to the National Appeals Chamber. This Chamber can only consider procurement disputes regulated by the PPL. In the case of procurement under the Decision 367/MON, contractors can only file claims to civil courts.

Conduct

How are defence and security procurements typically conducted?

The procurement of standard defence and security products is usually conducted as public procurement regulated by PPL. The strategic procurement, or any other procurement that is related with protecting the essential security interests of the state, is typically conducted on the basis of Decision 367/MON or a government-to-government arrangement (eg, contracting with the US government based on foreign military sales programme).

Under the PPL, there are two procedures available for defence and security procurement:

  • restricted procedure; or
  • negotiated procedure with the publication of a contract notice.

In addition, there are four more procedures that may be applied in certain cases:

  • competitive dialogue;
  • negotiated procedure without the publication of a contract notice;
  • single-source procurement; or
  • electronic auction.

Most procurement procedures involve a pre-qualification process, as part of which bidders must demonstrate their financial stability and technical capability, including experience in similar contracts. The way that the procurement proceeds depends on whether the authority selects a procedure that permits them to negotiate the contract and requirements with the bidders.

The negotiations phase is usually limited, with many of the contract terms being identified as non-negotiable. The evaluation process is undertaken on the basis of transparent award criteria, which are provided to bidders in advance in the tender documents. Once the winning bidder is selected, there is relatively little scope for further negotiation.

Decision 367/MON provides that the procurement procedure may be performed in the model of negotiations with one or several suppliers and, in exceptional cases, if it is not possible to define a closed catalogue of potential contractors, in a negotiated procedure with prior publication.

Proposed changes

Are there significant proposals pending to change the defence and security procurement process?

The current PPL will be in force until the end of 2020 and on 1 January 2021 it will be replaced by the Act of 11 September 2019 - Public Procurement Law (New PPL).

The PPL currently in force has been amended dozens of times during recent years; several of these amendments have been very extensive. The result of this is that it has been deemed to be too complicated for average contractors, hence the rewritten PPL.

The major changes in the New PPL include:

  • solutions introducing better tender procedure preparation;
  • a new principle of public procurement law - the principle of efficiency;
  • introduction of procedural simplifications, in particular for contracts below the EU thresholds;
  • better balance between the position of contracting authorities and contractors;
  • greater transparency of tender procedures;
  • introduction of an out-of-court dispute resolution mechanism; and
  • changes to public procurement agreements, including regulation of the valorisation of contracts.

The above changes will have an impact on all procurement procedures, including defence procurement.

Information technology

Are there different or additional procurement rules for information technology versus non-IT goods and services?

There are no specific or additional rules that relate to IT procurement.

Relevant treaties

Are most defence and security procurements conducted in accordance with the GPA or other treaty-based procurement rules, or does this jurisdiction commonly use the national security exemption to procure them?

The majority of defence and security procurements in Poland are conducted in accordance with the GPA, EU treaties or relevant EU directives. The number of contracts awarded based on the national security exemptions is limited, but the value of these contracts is usually substantial.

Disputes and risk allocation

Dispute resolution

How are disputes between the government and defence contractor resolved?

The PPL provides a legal remedies framework that may be used by the contractors who have, or who had, an interest in winning a contract, or have suffered, or may suffer, damage due to the contracting entity’s violation of the provisions of PPL. Disputes between the contracting authority and a contractor are resolved by the National Appeals Chamber (NAC) in Warsaw - a state entity (quasi-court) specialising in such disputes. Disputes are usually resolved within 14 days of submitting an application and usually after one hearing.

Disputes are resolved by the NAC in accordance with the dispute procedure regulated by the PPL and the Polish Civil Procedure Code. A ruling issued by the NAC may be appealed to a regional court of venue for the contracting entity’s registered office. The NAC has power to resolve disputes related to the procedure of awarding public contracts, while other disputes regarding (eg, the public contract performance, are resolved by common courts).

In most of the procurement proceedings conducted on the basis of exemption from the PPL (eg, where Decision 367/MON applies) the disputes are resolved by the common state courts. In practice it means that a dispute may last a very long time and may be completed many months after the contract was awarded to a competitor. This is a significant difference in comparison to procurement based on the PPL.

To what extent is alternative dispute resolution used to resolve conflicts? What is typical for this jurisdiction?

Typically, there is no formal alternative dispute resolution used to resolve conflicts between a contracting authority and a contractor. As stated above, the NAC, as a quasi-court, resolves conflicts at first instance. In practice, proceeding before the NAC may be considered as way of alternative dispute resolution. The procedure is very fast, simplified and aimed at obtaining a quick decision.

After the contract is awarded any disputes regarding the contract performance are resolved in accordance with the contract.

Indemnification

What limits exist on the government’s ability to indemnify the contractor in this jurisdiction and must the contractor indemnify the government in a defence procurement?

There are no specific rules governing liability under defence procurement.

During the contract performance phase, the contractual liability of the parties is governed by the contract and the general rules of Polish civil law. The PPL does not modify these principles, except on cooperation with subcontractors in construction works contracts.

There are no statutory or legal obligations on a contractor to indemnify the government, although contractual indemnities may result from negotiation (subject to a negotiated procedure being undertaken).

Limits on liability

Can the government agree to limit the contractor’s liability under the contract? Are there limits to the contractor’s potential recovery against the government for breach?

The contracting authority can agree to limit a contractor’s liability under the contract. However, the usual policy of awarding entities is to not accept a limit unless it is reasonable or is common market practice. It is common practice that a contracting entity’s liability towards contractors is limited to the amount of the contract value. The contract award procedure used by the contracting authority will determine the extent to which the limitation of liability is negotiable.

In addition, public contracts usually include provisions on the payment of liquidated damages. According to the Civil Code, the result of introducing such clauses eliminates further liabilities through the payment of an amount stipulated in advance in a contract. However, the public contract usually explicitly outlines the possibility of claiming damages for the amount exceeding the amount of the contractually stipulated liquidated damages.

Risk of non-payment

Is there risk of non-payment when the government enters into a contract but does not ensure there are adequate funds to meet the contractual obligations?

In theory there is a risk of non-payment, as with all customers. However according to the Act on Public Finances the awarding entities can only undertake obligations that are within its budget. Therefore in practice, the practical risk of non-payment for an undisputed, valid invoice by the awarding entity is very low. Additionally, major defence procurements are conducted in line with the Polish Armed Forces development programmes. These programmes are financed from a special Armed Forces modernisation fund or a state budget. Currently, the purchase of equipment for defence needs by the Ministry of Defence is done on the basis of the updated Plan for Technical Modernisation of the Polish Armed Forces for the years 2017-2026. Under this plan, the Ministry of Defence is entitled to conclude multi-year contracts with flexible budgets. The Ministry of Defence assumes that 185 billion zlotys will be spent during 2017-2026.

Parent guarantee

Under what circumstances must a contractor provide a parent guarantee?

The contracting authority should specify in its initial tender documentation its requirements concerning the guarantees to be provided by the contractor. Under the PPL, there is no obligation to provide a parent guarantee. The contracting entity may require a security of performance of the contract; this is customary for large contracts. The procurement regulations contain a list of forms in which security of performance of the contract should be provided. These include, primarily, bank guarantees and insurance guarantees (performance bonds).

The submission of a performance bond is only mandatory in offset agreements.

Defence procurement law fundamentals

Mandatory procurement clauses

Are there mandatory procurement clauses that must be included in a defence procurement contract or that will be read into the contract regardless of their actual inclusion?

There are mandatory clauses that must be included in a defence procurement contract on the basis of the PPL. There are also numerous provisions of the Polish Civil Code and other legal acts that will apply regardless of their inclusion in a defence procurement contract. The most important are mandatory provisions that cannot be modified by the parties in a contract (eg, scope of the public contract, termination, duration). Other non-mandatory provisions mainly stem from the Polish Civil Code (eg, those regarding payments, liabilities and warranties) and will be applicable unless otherwise agreed by the parties.

Cost allocation

How are costs allocated between the contractor and government within a contract?

There is no allocation of costs in public contracts. The consideration due to the contractor is indicated in a contract, usually as a fixed price for all contractual consideration. All costs incurred or estimated by the contractor plus an agreed profit rate would need to be included in the price.

Disclosures

What disclosures must the contractor make regarding its cost and pricing?

The contractor may be required to disclose the cost and pricing information in the case of complex procurements (typically in the form of a spreadsheet indicating the elements of the price and their calculation).

Additionally, if there is concern that the offered price is abnormally low, the awarding entity has a right to require more detailed information regarding cost and pricing.

Audits

How are audits of defence and security procurements conducted in this jurisdiction?

Audits of defence and security procurements may be conducted by:

  • Armament Inspectorate - on a regular basis by internal audit and control units;
  • Supreme Audit Office - temporarily, from the perspective of general compliance with law and, in particular, with the Act on Public Finances; and
  • the Ministry of Defence’s Office of Anticorruption Procedures and the Public Procurement Office - at the stage of procurement proceedings.

If the procurement is financed from EU funds there might be additional audit undertaken related to the correctness of spending of EU funds.

IP rights

Who gets the ownership rights to intellectual property created during performance of the contract? What licences are typically given and how?

The usual policy on the ownership of intellectual property arising under public contracts is that intellectual property that was created before the signing of the contract will normally vest with the contractor generating the intellectual property, in exchange for which the awarding entity will expect the right to disclose and use the intellectual property for the contracting authorities’ purposes (ie, a licence). However, the awarding entities will expect the contractor to transfer the intellectual property rights to it that have been created by the contractor exclusively for the awarding entity in performance of the contract.

The detailed scope of the licence depends on the subject of the contract.

Economic zones

Are there economic zones or other special programmes in this jurisdiction commonly utilised by foreign defence and security contractors for financial or other procurement related benefits?

There are no economic zones or programmes dedicated exclusively to defence contractors in Poland. In general, economic zones or similar special programmes exist in Poland for the benefit of entrepreneurs. Defence contractors may not only benefit from undertaking economic activity in economic zones, but also in areas where there are a lot of companies active in specific sectors; sometimes they are grouped in clusters, such as the Aviation Valley Association in south Poland.

Forming legal entities

Describe the process for forming legal entities, including joint ventures, in this jurisdiction.

There are various types of legal entities that may be formed, such as:

  • limited liability companies (LLC);
  • general partnerships;
  • limited liability partnerships (LLP);
  • limited partnerships;
  • limited joint stock partnerships; or
  • joint stock companies.

Business activities may also be conducted in the form of individual business activity, a civil partnership (under a contract) or a branch office of a foreign company.

A joint venture could either be a corporate or commercial joint venture.

A corporate joint venture would involve the joint venture parties setting up a new legal entity (likely, a limited liability company registered in Poland), which would be an independent legal entity able to contract in its own right and the joint venture parties are its shareholders. It is relatively straightforward and inexpensive to establish a company (required share capital for an LLC is 5,000 zlotys). The parties must file a motion together with respective attachments (eg, articles of association and so on) at registry court and pay the applicable filing fee. The company will gain its legal personality upon its registration in the National Court Register. The shareholders (ie, the joint venture’s parties) would also likely agree in a shareholders’ agreement the roles and responsibilities of each shareholder and their respective obligations to invest capital and resources into the company.

A commercial joint venture does not involve any separate legal entity, and the parties contractually agree each party’s roles and responsibilities based on various types of agreements such as cooperation agreements, consortium agreements and agreements on a common understanding.

In public procurement the most popular type of joint venture is a commercial consortium based on a consortium agreement.

Access to government records

Are there statutes or regulations enabling access to copies of government records? How does it work? Can one obtain versions of previous contracts?

Under the Access to Public Information Act 2001, there is a general right for the public to access information held by public bodies. As the Ministry of Defence is a public body, on the face of it this right would extend to contracts and records held by the Ministry of Defence - allowing anyone to request documents related to both the procurement and the contract performance phase.

However, Polish law indicates a few exemptions from disclosure of information related to the contract award procedure, which cover:

  • primarily classified information at the levels of restricted, confidential, secret and top secret information; or
  • information that is regarded as a business secret of the contractor; in such case a contractor is entitled to request information of a technical, technological, organisational or other nature, which is of economic value, not be disclosed by that contracting entity.

The proceedings conducted under Decision 367/MON, which are aimed at securing the essential security interests of the state, are commonly set at the ‘restricted’ level. Therefore, public access to documents under these proceedings is limited.

Supply chain management

What are the rules regarding eligible suppliers and supply chain management and anti-counterfeit parts for defence and security procurements?

Subject to limited exceptions, the PPL obliges an authority to reject tenders from bidders that have been convicted of certain serious offences. It also gives the contracting authority discretion to exclude bidders on other grounds, such as insolvency or gross professional misconduct. The rules expressly permit contracting authorities to consider the same exclusion grounds for subcontractors, as well as giving them broad rights (eg, to require a supplier to disclose all subcontracts or to flow down obligations regarding information security). In cases of procurement based on decision 367/MON, the awarding entity may also limit the use of subcontractors or may require specific conditions to be met by subcontractors.

Under the PPL, contracts for defence and security may be applied for by operators established in one of the member states of the EU or the European Economic Area, or a state with which the EU or the Republic of Poland has entered into an international agreement concerning these contracts. The contracting authority may specify in the contract notice that a contract for defence and security may also be applied for by economic operators from states other than those listed above.

In defence and security procurements, the contracting entities may influence management of the supply chain of the contractor. Despite general permission for contractors to use subcontractors under the PPL, the contracting entity has the right to:

  • limit the scope of the contract, which may be subcontracted;
  • request the contractor to specify in its offer which part or parts of the contract it intends to subcontract to fulfil the subcontracting requirement;
  • request the contractor to subcontract a share of the contract in a nondiscriminatory manner; or
  • refuse to consent to a subcontract with a third party if that party does not comply with the conditions for participation.

International trade rules

Export controls

What export controls limit international trade in defence and security articles? Who administers them?

Polish legislation implements EU regulations regarding export controls such as Council Regulation No. 428/2009 of 5 May 2009. The strategic goods (including dual-use items) captured by the Regulation are known as ‘controlled goods’ as trading in them is permitted as long as, where appropriate, an authorisation has been obtained.

The EU has adopted the Council Common Position 2008/944/CFSP defining common rules governing the control of exports of military technology and equipment (the Common Position) and an accompanying list of military equipment covered by such a Common Position (the Common Military List) in the EU. The Common Position and Common Military List have been implemented by Poland into its own national legislation.

Domestic preferences

What domestic preferences are applied to defence and security procurements? Can a foreign contractor bid on a procurement directly?

If the PPL applies, there is no scope for domestic preferences. Foreign contractors can bid on procurement directly without any local partner or without any local presence.

However, where article 346 TFEU is relied upon in order to exclude the application of the PPL, defence procurement proceedings are conducted according to Decision 367/MON. The contracting entity may then request that the prime contractor be a domestic company if it can be demonstrated that the essential security interests of the state justify it. Furthermore, on the basis of Decision 367/MON the contracting entity may demand from the foreign contractor additional obligations such as offset obligations or the establishment of production or maintenance capacity in Poland.

The result is that domestic contractors may be given a more favourable position in comparison with foreign contractors.

Favourable treatment

Are certain treaty partners treated more favourably?

Only EU member states or signatories of the GPA are able to benefit from the full protection of the PPL. Contractors from other countries may be less favourably treated, including total exclusion from bidding in procurement proceedings.

Sanctions

Are there any boycotts, embargoes or other trade sanctions between this jurisdiction and others?

Poland complies with all EU-implemented embargoes and (financial) sanctions that are imposed by the United Nations or the EU. All of these embargoes and sanctions are implemented through EU regulations, which have direct legal effect in each member state. Poland complies also with the economic and trade sanctions imposed by organisations such as the Organization for Security and Cooperation in Europe and the North Atlantic Treaty Organization.

Trade offsets

Are defence trade offsets part of this country’s defence and security procurement regime? How are they administered?

Defence trade offsets are part of Poland’s defence and security procurement regime. However the use of offsets is limited to specific cases. They are required only if both the procurement itself and the related offset are justified by the existence of an essential security interest of the state. Offset requirements apply only to foreign contractors, so they can be used as a form of domestic preferential treatment.

The Offset Act is the governing regulation regarding offset agreements and was harmonised with the EU approach to offsets. Offset requirement can be justified on the basis of article 346 of the TFEU, if it is necessary for the protection of the essential security interests of the state.

Offsets are not performed in public procurement proceedings under the PPL. They are admissible only in proceedings governed by Decision 367/MON or in other procurements that are exempted from the PPL (eg, G2G agreements). Offsets are negotiated by the Ministry of Defence. Signing an offset contract occurs after a procedure that consists of sending to the contractor offset assumptions drafted by the Ministry of Defence and submission by the foreign contractor an offset offer that responds to the assumptions.

Ethics and anti-corruption

Private sector appointments

When and how may former government employees take up appointments in the private sector and vice versa?

The employment of former government employees in the private sector and vice versa is subject to restrictions stipulated in:

  • the PPL and Decision 367/MON;
  • the Act of 21 August 1997 regarding Limitation of Conducting Business by Persons Exercising Public Functions; and
  • the Act of 11 September 2003 on Professional Military Service.

Both the PPL as well as Decision 367/MON state that an economic operator who was involved in the preparation of a given contract award procedure or whose employee was involved in the preparation of such a procedure must be excluded from such a proceeding. Under the PPL, the exclusion is not mandatory if the distortion of competition thus caused can be remedied otherwise than by excluding that operator from participation in a procedure.

According to the Act regarding Limitation of Conducting Business by Persons Exercising Public Functions, governmental employees may not be employed or perform other activities for an entrepreneur within one year from the date of cessation of their position or function, if they participated in the issuance of a decision in individual cases concerning that entrepreneur.

On the basis of the Professional Military Service Act, professional soldiers cannot be employed or undertake employment on the basis of another title in businesses conducting activity in the production or trade of defence goods if, during three years prior to the date of his or her dismissal from professional military service, he or she participated in a procurement procedure concerning products, supplies, works and services or took part in the performance of a contract related to such business.

Addressing corruption

How is domestic and foreign corruption addressed and what requirements are placed on contractors?

Polish law criminalises domestic and foreign corruption practices. Moreover the PPL provides for sanctions for contractors who (or whose management or supervisory board members) have been sentenced for corruption by a final judgment. Such contractors must be excluded from the procurement proceedings.

Also, on the basis of Decision 367/MON at the stage of a contract’s signing, the contractor is obliged to sign a clause under which the contractor will pay liquidated damages in the amount of 5 per cent of the gross value of the contract in the event of corruption within the procurement involving the contractor or its representatives.

Lobbyists

What are the registration requirements for lobbyists or commercial agents?

The Lobbying Act 2005 requires that anyone active in the business of lobbying should be registered with the register of entities conducting lobbying activities held by the minister relevant for administrative affairs.

The rules of professional lobbying activity in the Sejm and Senate are set out in the Sejm and Senate regulations. Persons performing intermediation services in executing contracts concerning military equipment need to possess the relevant licence in accordance with the Act of 22 June 2001 on Conducting the Business of Manufacture and Sale of Explosives, Weapons, Ammunition and Technology for the Military or Police.

Limitations on agents

Are there limitations on the use of agents or representatives that earn a commission on the transaction?

Polish law does not provide for such limitations.

Aviation

Conversion of aircraft

How are aircraft converted from military to civil use, and vice versa?

Civil aircraft may not fly in Europe unless they comply with the airworthiness regime established pursuant to Regulation (EC) 2018/1139 or, if they fall within Annex I of the Regulation, are approved by individual member states.

Regulation 2018/1139 requires a type of certification process in accordance with certification specifications promulgated by the European Aviation Safety Agency (EASA). Annex I permits EU member states to approve ex-military aircraft unless EASA has adopted a design standard for the type in question. Moreover, there are separate registers for military and civil aircraft at the national level of legislation. The implementation of the registers of civil aircraft tasks results from the Aviation Law 2002 and the Regulation of the Minister of Transport, Construction and Maritime Economy of 6 June 2013 on the register of civil aircraft and signs and inscriptions on aircraft entered in that register.

The register for military aircraft is maintained by the Ministry of Defence and is mainly based on the regulation adopted in Order No. 3/MON of the Ministry of Defence dated 11 February 2004 on the keeping of a register of military aircraft. The order contains provisions that suggest that an aircraft cannot be included in both registers at the same time. For example, to include an aircraft in the military register, the application should be accompanied by a certificate of removal from a foreign aircraft register where the previous user was not from the Armed Forces. Until a military aircraft is removed from the military register, it cannot be entered into another aircraft register.

Drones

What restrictions are there on manufacture and trade of unmanned aircraft systems or drones?

The manufacturing and trade of unmanned aircraft systems or drones for military purposes requires a licence issued in accordance with the Act of 13 June 2019 on Conducting Business Activity Within the Scope of Manufacturing and Trade in Explosives, Weapons, Ammunition and Products and Technology for Military or Police Purposes.

The manufacturing and trade of unmanned aerial vehicles (UAVs) or drones for other purposes is currently in the process of harmonising the EU regulations. On 11 June 2019, two EU regulations on drones were published. They will harmonise the law in the EU in this field. These regulations are the Commission Delegated Regulation (EU) 2019/945 of 12 March 2019 and Commission Implementing Regulation (EU) 2019/947 of 24 May 2019. From June 2020, the registration of drones will be mandatory. On the basis of new regulations, drones’ manufacturing and trading will be subject to a number of exploitation requirements for the purpose of qualification within one of the categories proposed by the EU.

Miscellaneous

Employment law

Which domestic labour and employment rules apply to foreign defence contractors?

There are no specific statutory employment rules that apply exclusively to foreign defence contractors. If the work is to be performed by a Polish worker or in Poland, the employment contract with the foreign contractor cannot be less favourable to the employee than the rules stipulated in Polish labour law. The choice of a foreign law may therefore, only result in the implementation of more favourable obligations (eg, longer holiday periods). Foreign contractors should also consider tax and insurance-related consequences in relation to the performance of work by employees in Poland.

Defence contract rules

Are there any specific rules that contractors, foreign or domestic, are bound by in defence contracts?

The answers above provide the details of the laws, regulations and decisions applicable to the defence contracting authorities and contractors, most notably the PPL, the Decision 367/MON and the offset law. Apart from that, there are other mandatory provisions of Polish law with respect to defence contracts provided by acts such as the Industrial Property Law dated 30 June 2000, the Act on Copyright and Related Rights of 4 February 1994, or other legislation governing supervision of military equipment or assessment of conformity of goods.

Do contractors avail themselves of these rules when they perform work exclusively outside of the jurisdiction?

If a contractor provides goods, services or works to a Polish awarding entity, the regulations detailed above will apply generally to all activities of the contractor related to the performance of the contract. If the work is performed outside of Poland, Polish rules will apply only to delivery of the results of these works to a Polish awarding entity unless the contract provides otherwise. A Polish awarding entity may, for instance, request the right to audit the production units of the contractor located abroad.

Personal information

Must directors, officers or employees of the contractor provide personal information or certify that they fulfil any particular requirements to contract with a government entity?

Companies will be asked to provide information about their management and supervisory board members as part of the pre-qualification process, and will usually be required to provide the official certificates certifying that management and supervisory board members have not been convicted of certain offences. In addition, the name, place of residence and the information from the criminal records of these persons must be disclosed to the contracting authority. On the basis of this information, the contracting authority makes a decision concerning a contractor’s potential exclusion.

Licensing requirements

What registration or licensing requirements exist to operate in the defence and security sector in the jurisdiction?

The Act of 13 June 2019 on Conducting Business Activity Within the Scope of Manufacturing and Trade in Explosives, Weapons, Ammunition and Products and Technology for Military or Police Purposes provides for specific licensing requirements to operate in the defence and security sector in Poland. These requirements relate to various areas of business activity. For example, one of the criteria is that a specific number of the members of the management board of the company need to be citizens of Poland or an EU/EEA member country. The licensing authority is the Minister of Internal Affairs.

In addition, a contractor may be obliged to meet additional procurement requirements such as obtaining a necessary licence to operate in the defence and security sector issued by the country of the contractor’s residence. The contracting authority publishes specific conditions in the procurement documentation (typically in terms of reference). The defence contractor may be also required to meet other procurement conditions such as military quality control systems.

Environmental legislation

What environmental statutes or regulations must contractors comply with?

Contractors producing or supplying goods and services or importing them into Poland will face different environmental legislation depending on their operations, product or service. The most important act in this area is the Polish Environmental Law. Contractors could face regulations encompassing, among other things, air emissions, water discharges, water pollution, noise and waste disposal, and face responsibility for electrical waste and electronic equipment and restrictions on hazardous substances in such equipment. Applicable requirements may also incorporate energy efficiency, carbon emissions and energy consumption.

In some circumstances there are exemptions, derogations or disapplication from environmental legislation for defence and military operations. One of them is derogation in respect to military aircraft from Regulation (EC) No. 2018/1139 of 4 July 2018 on common rules in the field of civil aviation and establishing EASA.

Must companies meet environmental targets? What are these initiatives and what agency determines compliance?

The companies may need to meet environmental targets under respective environmental legislation. The contractors may be required to meet environmental targets if their activity has a negative impact on the environment. These requirements are the most important for manufacturers. However, in general, any activity that influences the environment may require relevant environmental permits. In Poland, the authorities conducting inspections and issuing permits are, in particular, the Ministry of Environment and local government administration bodies.

Do ‘green’ solutions have an advantage in procurements?

The contracting authorities may include in the procurements ‘environmental’ parameters such as life cycle costs of a product or non-price environmental criteria for the evaluation of tenders. If such a requirement is included in the terms of reference then the contractor offering products compatible with such requirements may obtain an advantage.

Updates & Trends

Key developments of the past year

What were the key cases, decisions, judgments and policy and legislative developments of the past year

Key developments of the past year 41 What were the key cases, decisions, judgments and policy and legislative developments of the past year?

Adoption of the New PPL is the most important legislative development of 2019. The New PPL will enter into force on 1 January 2021. However, most changes will not influence defence procurement substantially. The local procurement defence legislation, such as the Decision 367/MON, remain unchanged since 2015.

In October 2019, the Polish the Ministry of Defence signed a new Technical Modernization Plan for the period 2021-2035, also covering 2020. The plan envisages modernisation expenditure in the total amount of 524 billion zlotys. The most important programmes included in the plan are:

  • Harpia - acquisition of 32 fifth generation multi-role combat aircraft;
  • Narew - short-range air defence system;
  • Cyber.mil.pl - modern cryptographic and information technology hardware, expenditure is to be contained in an amount of 3 billion zlotys;
  • Wisła - medium-range air defence system;
  • Gryf - tactical UAVs;
  • Ważka - micro UAVs;
  • Płomykówka - maritime patrol aircraft;
  • Miecznik - coastal defence vessels;
  • Orka - submarines;
  • Regina - Krab howitzer squadron fire module elements;
  • Rak - self-propelled mortars based on the Rosomak APC;
  • Homar - long-range rocket artillery;
  • Pustelnik - light anti-tank guided missile launchers;
  • Borsuk - infantry fighting vehicles; and
  • Mustang - high mobility passenger/cargo vehicles.