Cross-border defence procurement and trade in Poland

International trade rules

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

The export control system applicable in Poland is harmonised with the EU regulations (Council Regulation No. 428/2009 of 5 May 2009). Authorisations are necessary (individual, global or national general export authorisations) for the trade in strategic goods (including dual-use).

In Poland, authorisations are issued by the minister relevant for the economy (currently the Minister of Entrepreneurship and Technology), who issues a list of armaments that require authorisation.

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

In principle, foreign contractors may bid on procurements directly. Neither the PPL nor Decision 367 explicitly indicate that the contracting entity can prefer domestic contractors. Nevertheless, if justified by the essential security interests of the state (ie, in proceedings conducted under Decision 367), the contracting entity may demand from the foreign contractor some forms of industrial cooperation such as offset or the establishment of production or maintenance capacity in Poland, which may offer an advantage to domestic contractors that are not burdened with such obligations (although the obligations may have to be shifted to the foreign sub-suppliers of a domestic contractor). Moreover, the contracting entity may go so far as to request that the prime contractor be a domestic company (at least indirectly controlled by the Polish State Treasury), again, if it can be demonstrated that it is justified by the essential security interests of the state.

Are certain treaty partners treated more favourably?

The PPL, in line with the EU procurement regulations, does not allow discrimination on the basis of nationality with respect to other member states of the EU or the European Economic Area, or a state with which the European Union or Poland entered into an international agreement concerning such contracts. The less favourable treatment, for example, a prohibition on participating in procurement proceedings, can thus be limited only to other states that do not belong to these groups.

In practice, there may also be mechanisms within the European Union that make it easier, whether at the stage of procurement or performance of the contract, to fulfil or demonstrate fulfilment of certain requirements by EU-domiciled contractors.

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

Poland adheres to the trade sanctions imposed by the Security Council of the United Nations, the European Union, the Organization for Security and Co-operation in Europe and the North Atlantic Treaty Organization.

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

The Offset Act, which entered into force on 30 July 2014, is a result of harmonisation with the EU approach to offsets. The general rule recognised by the European Commission is that any type of offset is a restrictive measure that goes against the basic principles of EU law by impeding the free movement of goods and services. Nevertheless, the EU Commission admits that offset requirements can be justified on the basis of article 346 of the Treaty on the Functioning of the European Union, if necessary, for the protection of the essential security interests of the state.

Therefore, offsets in Poland are part of the defence and security procurement regime, but may be required only if both the procurement itself and the related offset are justified by the existence of an essential security interest of the state.

The possible justification for allowing offsets narrows down the scope of admissible offset to direct obligations, namely:

• offset commitments directed towards offset recipients operating in armament production or trade business; and
• ensuring independence from the foreign supplier in order to maintain or establish in Poland production, servicing, maintenance or other capabilities necessary from the point of view of protection of essential security interests of the state.

It is arguable whether offsets can be justified by essential security interests unrelated to the subject of the procurement, although the MoD has adopted such position on certain occasions.

Offsets are not admissible in proceedings subject to the PPL, but only those governed by Decision 367 or otherwise exempt from the PPL (eg, G2G). Offsets are negotiated by the MoD and the offset contract is executed by the State Treasury represented by the MoD following an offset offer submitted by a foreign supplier in response to the assumptions for an offset offer drafted by the MoD and constituting part of the terms of reference of the procurement procedure. A supply contract cannot be executed before an offset contract becomes effective, that is, upon its approval by the Council of Ministers (the Cabinet).